Question 1

Gerald files a bankruptcy petition. The resulting automatic stay will apply to Gerald's

Accepted Answer

The answer of Gerald files a bankruptcy petition. The resulting...

Question 2

A court awards a judgment to Alice, who is the creditor, against Ada, who is the debtor. After the judgment, Alice requests a court order to seize Ada's property to ensure that the judgment will be collectible. This is

Accepted Answer

A writ of execution is a court order to seize a debtor's property to satisfy a judgment.

Question 3

Norma Jean files for Chapter 7 bankruptcy. She turns her assets over to Addie, who sells the assets and then distributes the proceeds to Norma Jean's creditors. Addie is a

Accepted Answer

Addie is a bankruptcy trustee, which is a court-appointed individual responsible for managing the debtor's assets and distributing the proceeds to creditors.

Question 4

Daphne defaults on a debt to Country Loan Corporation (CLC). As a creditor, CLC can place liens on all of Daphne's property except

Accepted Answer

According to most states' exemption laws, motor vehicles used to commute to work are usually considered exempt property and cannot be used to satisfy a creditor's claim. The other choices may all be subject to liens.

Question 5

Fact Pattern 15-1 (Questions 12-15 apply)
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
-Refer to Fact Pattern 15-1. Mary will receive

Accepted Answer

The $30,000 homestead exemption in Mary's state means that $30,000 of the proceeds from the sale of her home is protected and cannot be used to pay off her debt to Nina. Therefore, Mary will receive the remaining $30,000 ($80,000 sale price - $30,000 homestead exemption - $60,000 debt owed to Nina).

Question 6

Muffins-2-Go buys a truck from Street Vehicles, Inc., under a contract signed by Riley, Muffins-2-Go's president, making him personally liable if Muffins-2-Go does not pay the loan. Riley is

Accepted Answer

The answer of Muffins-2-Go buys a truck from Street Vehicles,...

Question 7

Dana defaults on a debt to Rachel. Rachel will NOT be able to recover the debt from

Accepted Answer

The answer of Dana defaults on a debt to Rachel....

Question 8

Roland files for Chapter 7 bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts

Accepted Answer

Chapter 7 bankruptcy results in the discharge of most unsecured debts, meaning the remaining debts are no longer legally enforceable and Roland is not required to pay them.

Question 9

Drew and Earl are brothers. They agree to act as guarantors on a loan made by their sister, Flo. Flo defaults on the payments and Drew re?fuses to pay. Earl pays the debt. Earl can recover from

Accepted Answer

Under the right of contribution, each guarantor is responsible for paying an equal share of the debt. Since Drew refused to pay, Earl can recover from him under the right of contribution. However, since Earl paid the entire debt, he can also seek reimbursement from Flo under the right of subrogation, which allows him to step into the shoes of the lender and pursue the borrower for the debt.

Question 10

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is

Accepted Answer

The answer of Dina asks Edie to co-sign a credit...

Question 11

Consumer Credit, Inc. (CCI), lends $1,000 to Joe. Kay acts as Joe's surety. If Kay pays the loan, she gets

Accepted Answer

As Kay is acting as Joe's surety, she is guaranteeing payment of the loan if Joe fails to pay. Therefore, if Kay pays the loan, she has the right to be reimbursed by Joe. Additionally, as a surety, Kay steps into Joe's shoes and has any right that CCI had against Joe, including the right to take legal action to recover the debt. Therefore, choice C is the correct answer.

Question 12

Fact Pattern 15-1 (Questions 12-15 apply)
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
-Refer to Fact Pattern 15-1. Nina may recover

Accepted Answer

Nina may recover up to the amount of the debt owed to her, which is $60,000. However, Mary's home is also subject to the $30,000 homestead exemption, which means that up to $30,000 of the proceeds from the sale of the home are exempt from creditor claims. Therefore, Nina may recover the remaining $50,000 ($80,000 - $30,000 = $50,000).

Question 13

Bobby has fifteen creditors. To force Bobby into bankruptcy proceedings, at least three creditors must join the petition and their unsecured claims must add up to at least

Accepted Answer

The answer of Bobby has fifteen creditors. To force Bobby...

Question 14

Fact Pattern 15-1 (Questions 12-15 apply)
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
-Refer to Fact Pattern 15-1. Other property Mary may own that may be ex?empt from satisfaction of judgment debts includes

Accepted Answer

Tools that Mary uses in her trade are typically considered necessary for her livelihood and may be exempt from satisfaction of judgment debts under state exemption laws.

Question 15

William is a surety for Jeannie's loan from Richard. Richard knows of William's existence. When the loan comes due, Jeannie tries to pay Richard, but Richard rejects the payment. William is

Accepted Answer

The answer of William is a surety for Jeannie's loan...

Question 16

Fact Pattern 15-1 (Questions 12-15 apply)
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
-Refer to Fact Pattern 15-1. If Nina recovers less than she is owed, she can realize the difference from

Accepted Answer

Nina can recover the difference from any nonexempt property that Mary owns, as exempt property is protected from creditors.

Question 17

Wilson wants to file an ordinary, or straight, bankruptcy. Wilson should file using

Accepted Answer

Chapter 7 bankruptcy is the most common and straightforward type of bankruptcy for individuals and small businesses. It involves selling off non-exempt assets to pay off debts and getting a fresh start. Chapter 11 is for larger businesses, and Chapter 13 involves a payment plan to pay off debts over time. Filing under the state's bankruptcy code may not provide the same protections and options as federal bankruptcy laws.

Question 18

Bess wishes to appeal a decision from a federal bankruptcy court. Bess must appeal to

Accepted Answer

Bess must appeal to a federal district court, as federal bankruptcy courts are a part of the federal court system. The U.S. Supreme Court only hears cases on appeal from lower federal and state courts, and a state court would not have jurisdiction over a federal bankruptcy case. A county court also would not have jurisdiction over a federal bankruptcy case.

Question 19

Joe files a voluntary petition for Chapter 7 bankruptcy. His petition does not need to include

Accepted Answer

The occupations of the creditors are not necessary information in a Chapter 7 bankruptcy petition. The petition should include a list of secured and unsecured creditors, as well as their addresses.

Question 20

Donna goes through an involuntary bankruptcy proceeding. An invol?un?tary bankruptcy occurs when

Accepted Answer

An involuntary bankruptcy occurs when a debtor's creditors force the debtor into bankruptcy proceedings. In this scenario, Donna is not choosing to file for bankruptcy, but is instead being forced into the process by her creditors. The other options (A, B, and D) describe voluntary bankruptcy, insolvency, and negative net worth, respectively.

Quiz 15: Creditors Rights and Bankruptcy