Question 1

The main power of a strong arm clause, authorized under the Bankruptcy Code, that assists the debtor in possession significantly is

Accepted Answer

A)  The ability to streamline the bankruptcy process. 
B)  The ability to involuntarily force unwilling creditors to participate in the process. 
C)  The protection of assets subject to immediate liquidation by the judicial system. 
D)  The ability to avoid any obligation or transfer of property that the debtor would otherwise be obligated to perform. 
A)  The ability to streamline the bankruptcy process. 
B)  The ability to involuntarily force unwilling creditors to participate in the process. 
C)  The protection of assets subject to immediate liquidation by the judicial system. 
D)  The ability to avoid any obligation or transfer of property that the debtor would otherwise be obligated to perform. D

Question 2

Toni is in great debt and therefore files for a Chapter 7 bankruptcy and seeks to liquidate assets and discharge her debt. Which of the following is the first step in this process?

Accepted Answer

A)  Appoint a bankruptcy trustee. 
B)  Toni must pay off her assets. 
C)  Toni must file a notice with her creditors. 
D)  The court must itemize the assets. 
A)  Appoint a bankruptcy trustee. 
B)  Toni must pay off her assets. 
C)  Toni must file a notice with her creditors. 
D)  The court must itemize the assets. A

Question 3

In the case Sauer v. Lawson, the court ruled

Accepted Answer

A)  Fraud may be inferred by actual conduct rather than a need to have specific intent. 
B)  Actual fraud can only be proven if malice aforethought is shown in the transactions. 
C)  Fraud may be inferred by actual conduct rather and need to have a specific intent. 
D)  Actual fraud includes conduct that is intended to hinder creditors. 
A)  Fraud may be inferred by actual conduct rather than a need to have specific intent. 
B)  Actual fraud can only be proven if malice aforethought is shown in the transactions. 
C)  Fraud may be inferred by actual conduct rather and need to have a specific intent. 
D)  Actual fraud includes conduct that is intended to hinder creditors. D

Question 4

A chapter 11 bankruptcy process in which the debtor generally remains in control of assets and business operations in an attempt to rehabilitate the business entity is called

Accepted Answer

A)  Bankruptcy estate administrator 
B)  Creditor in possession 
C)  Debtor in possession 
D)  Fiduciary estate administrator 
A)  Bankruptcy estate administrator 
B)  Creditor in possession 
C)  Debtor in possession 
D)  Fiduciary estate administrator

Question 5

Which of the following statements is true about the Bankruptcy Abuse Prevention and Consumer Protection Act?

Accepted Answer

A)  It established a baseline income for Chapter 7 discharge of debt versus being required to repay debts under Chapter 13. 
B)  It allowed creditors greater option for pursuing unsecured debt. 
C)  It streamlined the bankruptcy process and made it easier. 
D)  It allowed the average person to file their own bankruptcy without the need for legal representation. 
A)  It established a baseline income for Chapter 7 discharge of debt versus being required to repay debts under Chapter 13. 
B)  It allowed creditors greater option for pursuing unsecured debt. 
C)  It streamlined the bankruptcy process and made it easier. 
D)  It allowed the average person to file their own bankruptcy without the need for legal representation.

Question 6

Realizing that Dante Corporation is insolvent, the debtor in possession files for Chapter 11. As part of the process, the debtor in possession submits a proposal which restructures the board, the leadership roles and the use of existing assets to repay creditors and also reinvest money into the company to spur economic growth. This plan is called

Accepted Answer

A)  A revitalization plan. 
B)  A reorganization plan. 
C)  A restructuring plan. 
D)  A rehabilitation plan. 
A)  A revitalization plan. 
B)  A reorganization plan. 
C)  A restructuring plan. 
D)  A rehabilitation plan.

Question 7

Bill graduated from school with a substantial amount of student loan debt. Instead of getting a job he decides to spend his time skiing in Colorado and attempts to file for Chapter 7 bankruptcy to have a fresh start with no student loans once the skiing season ends. Which statement below is correct about Bill's plan?

Accepted Answer

A)  All of his student loan debt will be erased. 
B)  Half of his student loan debt will be erased. 
C)  Under no circumstances will his student loan debt be erased. 
D)  His student loan debt will be erased only if he can prove undue hardship. 
A)  All of his student loan debt will be erased. 
B)  Half of his student loan debt will be erased. 
C)  Under no circumstances will his student loan debt be erased. 
D)  His student loan debt will be erased only if he can prove undue hardship.

Question 8

The debtor in possession for the failing Lipnisky Corporation submits a reorganization plan. One of the creditors refuses to accept the plan. What options might the Lipnisky Corporation have at this point?

Accepted Answer

A)  Only to file for Chapter 7 bankruptcy. 
B)  To request a cram-down provision. 
C)  To file criminal charges against the creditor. 
D)  To exclude the creditor from the process. 
A)  Only to file for Chapter 7 bankruptcy. 
B)  To request a cram-down provision. 
C)  To file criminal charges against the creditor. 
D)  To exclude the creditor from the process.

Question 9

Wilma lives in Illinois where the average income is $42,500. Her annual income is $43,000. Will she be able to file for chapter 7 bankruptcy?

Accepted Answer

A)  Yes. 
B)  No. 
C)  Yes, if the court determines justice and fair play dictate it. 
D)  No if the court determines the creditors will be unfairly harmed. 
A)  Yes. 
B)  No. 
C)  Yes, if the court determines justice and fair play dictate it. 
D)  No if the court determines the creditors will be unfairly harmed.

Question 10

Travis has overextended himself with his mortgage payments, credit card debt and car payments that his current salary can no longer support. He has a steady income but it is no longer enough. Which type of bankruptcy would you suggest that would that would allow him to catch up?

Accepted Answer

A)  Chapter 7 
B)  Chapter 11 
C)  Chapter 13 
D)  Chapter 15 
A)  Chapter 7 
B)  Chapter 11 
C)  Chapter 13 
D)  Chapter 15

Question 11

The assets of the debtor available in a bankruptcy proceeding is called a(n)

Accepted Answer

A)  Discharge property 
B)  Bankruptcy estate 
C)  Perfected estate 
D)  Lien estate 
A)  Discharge property 
B)  Bankruptcy estate 
C)  Perfected estate 
D)  Lien estate

Question 12

Two weeks before Edna files for bankruptcy she pays a friend $25,000, the full amount of money she owes her. After paying her friend, Edna has only $100 in assets but still owes $50,000 in other debt. What will the court likely do?

Accepted Answer

A)  Divide the $100 among the remaining creditors. 
B)  Take half of the money Edna paid her friend and put it in the bankruptcy estate. 
C)  The trustee will void the transfer. 
D)  The court will put a stay so that no other assets can be liquidated. 
A)  Divide the $100 among the remaining creditors. 
B)  Take half of the money Edna paid her friend and put it in the bankruptcy estate. 
C)  The trustee will void the transfer. 
D)  The court will put a stay so that no other assets can be liquidated.

Question 13

The goal of a Chapter 7 bankruptcy is to offer a debtor a fresh start.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statement below is incorrect about a Chapter 7 involuntary bankruptcy petition?

Accepted Answer

A)  It is filed against a debtor by three or more creditors. 
B)  The creditors' claim against the debtor must be at least $15,775. 
C)  This process is relatively rare. 
D)  Courts employ this only against businesses. 
A)  It is filed against a debtor by three or more creditors. 
B)  The creditors' claim against the debtor must be at least $15,775. 
C)  This process is relatively rare. 
D)  Courts employ this only against businesses.

Question 15

In the case, Kelley v. Cypress Financial Trading Co., the court ruled that the twin pillars of bankruptcy are

Accepted Answer

A)  To protect the debtors and to be efficient. 
B)  The discharge of the debtor and to satisfy the valid claims. 
C)  To protect the judicial system and to keep a business in good standing. 
D)  To be efficient and to be fair to all parties involved. 
A)  To protect the debtors and to be efficient. 
B)  The discharge of the debtor and to satisfy the valid claims. 
C)  To protect the judicial system and to keep a business in good standing. 
D)  To be efficient and to be fair to all parties involved.

Question 16

Terri gives her son a birthday gift of $20,000, the entire contents of her savings account. The next day, Terri files for bankruptcy. What, if anything, may happen to the gift to her son?

Accepted Answer

A)  Nothing. Gifts can never be undone. 
B)  The court may reduce the amount of the gift to cover half of the debts owed. 
C)  Terri would go to jail. 
D)  The transfer would be undone if it is proven that Terri's intent was to defraud creditors. 
A)  Nothing. Gifts can never be undone. 
B)  The court may reduce the amount of the gift to cover half of the debts owed. 
C)  Terri would go to jail. 
D)  The transfer would be undone if it is proven that Terri's intent was to defraud creditors.

Question 17

All of the following statements about Chapter 11 bankruptcy are true except

Accepted Answer

A)  It offers a permanent liquidation of assets. 
B)  It temporarily protects corporations from creditors. 
C)  It allows businesses to continue business operations. 
D)  It recognizes that it is better to revive a business than terminate it. 
A)  It offers a permanent liquidation of assets. 
B)  It temporarily protects corporations from creditors. 
C)  It allows businesses to continue business operations. 
D)  It recognizes that it is better to revive a business than terminate it.

Exam 26: Bankruptcy

The main power of a strong arm clause, authorized under the Bankruptcy Code, that assists the debtor in possession significantly is

Toni is in great debt and therefore files for a Chapter 7 bankruptcy and seeks to liquidate assets and discharge her debt. Which of the following is the first step in this process?

In the case Sauer v. Lawson, the court ruled

A chapter 11 bankruptcy process in which the debtor generally remains in control of assets and business operations in an attempt to rehabilitate the business entity is called

Which of the following statements is true about the Bankruptcy Abuse Prevention and Consumer Protection Act?

The debtor in possession for the failing Lipnisky Corporation submits a reorganization plan. One of the creditors refuses to accept the plan. What options might the Lipnisky Corporation have at this point?

Wilma lives in Illinois where the average income is $42,500. Her annual income is $43,000. Will she be able to file for chapter 7 bankruptcy?

Travis has overextended himself with his mortgage payments, credit card debt and car payments that his current salary can no longer support. He has a steady income but it is no longer enough. Which type of bankruptcy would you suggest that would that would allow him to catch up?

The assets of the debtor available in a bankruptcy proceeding is called a(n)

Two weeks before Edna files for bankruptcy she pays a friend $25,000, the full amount of money she owes her. After paying her friend, Edna has only $100 in assets but still owes $50,000 in other debt. What will the court likely do?

The goal of a Chapter 7 bankruptcy is to offer a debtor a fresh start.

Which of the following statement below is incorrect about a Chapter 7 involuntary bankruptcy petition?

In the case, Kelley v. Cypress Financial Trading Co., the court ruled that the twin pillars of bankruptcy are

Terri gives her son a birthday gift of $20,000, the entire contents of her savings account. The next day, Terri files for bankruptcy. What, if anything, may happen to the gift to her son?

All of the following statements about Chapter 11 bankruptcy are true except

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