Question 1

Stan commits securities fraud and takes $5,000,000 from a variety of investors. Stan is convicted of a crime and then sued by the investors. Stan files for bankruptcy. What relief will the bankruptcy filing grant Stan?

Accepted Answer

When a Chapter 7 bankruptcy petition is filed, an automatic stay goes into effect. The stay is a self-operating postponement of collection proceedings against the debtor and any further efforts by creditors to debts must stop immediately-except for debts caused by fraud, amounts owed for back taxes, family support, and student loans that do not impose a hardship on the debtor.

Question 2

In 1978, Chapters 11 and 13 of the Bankruptcy Code were created, which:

Accepted Answer

Chapters 11 and 13 of the Bankruptcy Code, created in 1978, allowed businesses and individuals to reorganize and keep going. In addition, debtors were allowed to keep more of their assets, giving them a better chance to make a fresh start with their activities.

Question 3

Sear Enterprises wants to continue in business, but needs some relief from creditors' claims. Sear Enterprises should consider filing under Chapter ____________ of the Bankruptcy Code.

Accepted Answer

Chapter 11 of the Bankruptcy Code provides a method for businesses to reorganize their financial affairs and still remain in business.

Question 4

According to Chapter 13 of the Bankruptcy Code, which of the following statements is correct?

Accepted Answer

Sometimes, debtors have regular income, but cannot pay all their bills on time. If given time, they may eventually be able to pay at least part of the amount they owe to each creditor. Rather than selling the debtor's property, Chapter 13 of the Bankruptcy Code permits an individual debtor to put in place a repayment plan.

Question 5

Under Chapter 13 of the Bankruptcy Code a debtor must begin payments within a period of ____________ from submission.

Accepted Answer

The debtor must start payments within 30 days of submitting the plan to the court.

Question 6

A(n) ____________ is a self-operating postponement of collection proceedings against the debtor, which goes into effect the moment the order for relief occurs.

Accepted Answer

When a voluntary or involuntary petition is filed, an automatic stay goes into effect. This stay is a self-operating postponement of collection proceedings against the debtor.

Question 7

In a ____________, a qualified debtor creates a plan that alters the repayment schedule.

Accepted Answer

In a Chapter 11 reorganization, a qualified debtor creates a plan that alters the repayment schedule.

Question 8

Under the 2005 Bankruptcy Act, debtors are required to meet which of the following conditions file for Chapter 7 bankruptcy?

Accepted Answer

Under the 2005 Bankruptcy Act, however, not everyone is allowed to file for Chapter 7 bankruptcy. To qualify, debtors must do all of the following:• Satisfy the means test.• Meet with an approved nonprofit credit counsellor before filing for bankruptcy.• Provide a federal income tax return for the most recent tax year.• Take a course in financial management after filing for bankruptcy.

Question 9

Vernon owns a family run farming business. He earned $100,000 in the current financial year. He owes $70,000 that he cannot pay. This debt forms a part of his farm expenses to creditors, but he wants to keep the business running. Which type bankruptcy should Vernon file for?

Accepted Answer

Chapter 12 of the Family Farmer or Fishing Business Debt Adjustment Act is designed to help farming and fishing proprietors, with regular income, create a plan for debt repayment that will allow them to keep their family businesses running.

Question 10

Joseph owes $15,000 to Carmel Enterprises, $8,500 to Vulcan Co., $11,000 to David and $11,500 to Sigma Enterprises. He has not been making payments on these debts for the past 20 months. Which of these creditors can force Joseph into involuntary bankruptcy?

Accepted Answer

Under Chapter 7 of the Bankruptcy Code, creditors may be able to force debtors, other than farmers, into involuntary bankruptcy if the debtor fails to pay bills generally as they become due. A single creditor who is owed a debt of more than $14,425 can file if the debtor has fewer than 12 creditors.

Question 11

A debtor who continues to run a business and performs most of the functions that a trustee performs in other types of bankruptcy is called a(n):

Accepted Answer

A debtor is referred to as a debtor in possession under Chapter 11 because the debtor keeps possession and control of the assets, continues to run the firm, and performs most of the functions that a trustee performs in other types of bankruptcy.

Question 12

The only individuals specifically excluded from filing under Chapter 11 are:

Accepted Answer

Individuals, partnerships, and corporations can file; railroads can file; only commodity brokers and stockbrokers cannot. Filing can be voluntary or involuntary.

Question 13

Which of the following provides a system in which debtors are forced to sell most of their property and use the cash to pay their creditors a portion of the amount owed each one?

Accepted Answer

Chapter 7 of the Bankruptcy Code, sometimes referred to as ordinary bankruptcy, provides a system in which debtors are forced to sell much of their property and use the cash to pay their creditors a portion of the amount owed each one. This process is also called liquidation.

Question 14

Trudy has a steady income, but is behind on her payment of debts. Trudy wants to pay her debts, but needs some relief from her creditors. Discuss what type of Bankruptcy Procedure would best fit her case.

Accepted Answer

The answer of Trudy has a steady income, but is...

Question 15

Under Chapter 13 of the Bankruptcy Code, what happens if the debtor submits the repayment plan to the court, but the court has yet to hold its hearing?

Accepted Answer

The debtor must start payments within 30 days of submitting the plan to the court. If the court has yet to hold its hearing, the debtor must make the payments to the trustee. The trustee holds the money until the court upholds or rejects the plan.

Question 16

The court vests the responsibility of liquidating the assets of the debtor for the benefit of all interested parties in the:

Accepted Answer

When an order for relief is issued, a case trustee is named by the court. The trustee is charged with the responsibility of liquidating the assets of the debtor for the benefit of all interested parties.

Question 17

Of the groups listed below, only ____________ can take advantage of Chapter 13 provisions.

Accepted Answer

Only individual debtors, including sole proprietors and self-employed people, can take advantage of Chapter 13 provisions. Neither corporations nor partnerships can file.

Question 18

Which of the following is a duty vested in a trustee by the court, when the debtor is a business and files a Chapter 7 petition?

Accepted Answer

If the debtor files a Chapter 7 petition and is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time.

Question 19

Which chapter of the bankruptcy code allows a federal homestead exemption?

Accepted Answer

Chapter 7 of the Bankruptcy Code allows debtors to keep a maximum of $21,625 in equity in the debtor's place of residence and in property used as a burial ground. This allowance is known as the federal homestead exemption. It also may determine how much needs to be paid to unsecured creditors in a Chapter 13 bankruptcy.

Question 20

The maximum time period that is allowed for Chapter 13 debtors to complete the payment plan is ____________ years.

Accepted Answer

Chapter 13 debtors must abide by the rule requiring that the payment plan be completed within three to five years.

Quiz 21: Bankruptcy and Debt Adjustment