Exam 13: Creditor-Debtor Relations and Bankruptcy

Rashi is a student at State University.In need of funds to pay for tuition and books,Rashi asks Tiempo Loans,Inc. ,for a short-term loan.The lender agrees to make a loan if Rashi will have someone who is financially responsible guarantee the loan payments.Umberto,a well-known businessperson and a friend of Rashi's family,calls Tiempo and agrees to pay the loan if Rashi cannot.Because of Umberto's reputation,the loan is made.Rashi is making the payments,but because of illness he is unable to work for one month.He asks Tiempo to extend the loan for three months.The lender agrees,raising the interest rate for the extended period.Umberto is not notified of the extension and thus does not consent to it.Later,all attempts to collect the remainder of the loan from Rashi fail.Can Tiempo assert a claim against Umberto on the debt?

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Question 1

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Tiempo cannot hold Umberto liable for two reasons.
First,Umberto's agreement is a guaranty contract to answer for the debt of another.The contract with the lender provided that Umberto would pay if Rashi could not;therefore,Umberto was made a guarantor,with secondary liability.For a guaranty contract to be enforceable,it must be in writing unless the "main purpose" rule applies.Because the contract was made over the phone and the guaranty was not for Umberto's primary benefit,the oral guaranty contract is unenforceable.
Second,guarantors have certain defenses against creditors that usually depend on certain actions being taken by the creditor.The extension agreement in this case is binding (the increased interest rate is the consideration),but it constitutes a material change in the original contract.Any binding,material change made in the terms of an original contract between a debtor and a creditor without the consent of the guarantor discharges the guarantor entirely,or at least to the extent that the guarantor suffers a loss.In this problem,that occurred when the lender agreed to extend the term of the loan at a higher interest rate without notifying and obtaining the guarantor's consent.Thus,Umberto has a defense against Tiempo's claim that would prevail even if the guaranty contract had been in writing.

Compared to Chapter 7 and 11 plans,a Chapter 13 plan

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Question 2

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Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property.This is

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Question 3

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Under Chapter 13,all debts are dischargeable.

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Question 4

Under Chapter 7,once the proceeds have been distributed,the obligations of the debtor most likely to be discharged are

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Question 5

Items of personal property that can be replaced by goods readily available in the marketplace are not exempt from satisfaction of judgment debts.

(True/False)

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Question 6

Equipment Company holds a lien on Fertile Farm's equipment.The equipment can be sold to satisfy the debt

(Multiple Choice)

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Question 7

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11,but not Chapter 13,bankruptcies.

(True/False)

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Question 8

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

(True/False)

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Question 9

To purchase a house,Nora obtains a mortgage loan from Oak Tree Loans LLC.Later,Nora informs Oak Tree that she may default on the payments.The lender agrees to delay taking possession of the property and selling it.The parties negotiate a payment plan for the amount due on the loan.This is

(Multiple Choice)

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Question 10

In a Chapter 11 proceeding,for an individual debtor,the court may order discharge at any time after the plan is confirmed.

(True/False)

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Question 11

Dot is awarded $150,000 in a suit against Evan,and obtains a court order to sell Evan's home at auction to satisfy the debt.Half of the $100,000 proceeds from the sale are paid to Dot toward the judgment.Under a state exemption statute,the remainder is given to Evan as

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Question 12

A court can dismiss a Chapter 7 petition if it finds that the use of Chapter 7 would constitute substantial abuse.

(True/False)

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Question 13

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

(True/False)

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Question 14

Foreclosure is a process that allows a debtor to legally block a creditor's repossession and sale of property securing a mortgage.

(True/False)

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Question 15

Under Chapter 7,a discharge is most likely to be denied if the debtor

(Multiple Choice)

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Question 16

When a co-surety pays more than his or her proportionate share on a debtor's default,he or she is entitled to recover from the debtor the excess amount paid.

(True/False)

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Question 17

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary.

(True/False)

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Question 18

Dana operates Energy Inc. ,a corporation in the fuel-supply business.Dana wants to create a plan under which the firm pays a portion of its debts,is discharged of the remainder,and is allowed to continue in business.Energy should file a petition in bankruptcy for relief through

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Question 19

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start,a discharge under Chapter 7 frees a debtor of all of his or her debts.

(True/False)

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Question 20

Showing 1 - 20 of 72

Exam 13: Creditor-Debtor Relations and Bankruptcy

Compared to Chapter 7 and 11 plans,a Chapter 13 plan

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property.This is

Under Chapter 13,all debts are dischargeable.

Under Chapter 7,once the proceeds have been distributed,the obligations of the debtor most likely to be discharged are

Items of personal property that can be replaced by goods readily available in the marketplace are not exempt from satisfaction of judgment debts.

Equipment Company holds a lien on Fertile Farm's equipment.The equipment can be sold to satisfy the debt

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11,but not Chapter 13,bankruptcies.

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

To purchase a house,Nora obtains a mortgage loan from Oak Tree Loans LLC.Later,Nora informs Oak Tree that she may default on the payments.The lender agrees to delay taking possession of the property and selling it.The parties negotiate a payment plan for the amount due on the loan.This is

In a Chapter 11 proceeding,for an individual debtor,the court may order discharge at any time after the plan is confirmed.

Dot is awarded $150,000 in a suit against Evan,and obtains a court order to sell Evan's home at auction to satisfy the debt.Half of the $100,000 proceeds from the sale are paid to Dot toward the judgment.Under a state exemption statute,the remainder is given to Evan as

A court can dismiss a Chapter 7 petition if it finds that the use of Chapter 7 would constitute substantial abuse.

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Foreclosure is a process that allows a debtor to legally block a creditor's repossession and sale of property securing a mortgage.

Under Chapter 7,a discharge is most likely to be denied if the debtor

When a co-surety pays more than his or her proportionate share on a debtor's default,he or she is entitled to recover from the debtor the excess amount paid.

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary.

Dana operates Energy Inc. ,a corporation in the fuel-supply business.Dana wants to create a plan under which the firm pays a portion of its debts,is discharged of the remainder,and is allowed to continue in business.Energy should file a petition in bankruptcy for relief through

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start,a discharge under Chapter 7 frees a debtor of all of his or her debts.

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