Question 1

Bankruptcy law is intended to ensure that

Accepted Answer

A) most people will not lend money in ordinary circumstances to people they do not know. 
B) debtors are relieved of the consequences of their insolvency. 
C) ordinary creditor-debtor laws are used to deal with insolvent debtors. 
D) there is a central clearing house for information about debt in Canada. 
E) debtors and creditors know what the consequences will be if debts cannot be repaid,and debtors may seek protection from creditors,including the orderly disposal of debtors' assets,and either winding up or rehabilitation of debtors. 
A) most people will not lend money in ordinary circumstances to people they do not know. 
B) debtors are relieved of the consequences of their insolvency. 
C) ordinary creditor-debtor laws are used to deal with insolvent debtors. 
D) there is a central clearing house for information about debt in Canada. 
E) debtors and creditors know what the consequences will be if debts cannot be repaid,and debtors may seek protection from creditors,including the orderly disposal of debtors' assets,and either winding up or rehabilitation of debtors. E

Question 2

In order to gain creditor (as opposed to court)approval for a proposal under the Bankruptcy and Insolvency Act,a proposal must command

Accepted Answer

A) a bare majority of all creditors in every class,plus the support of all secured creditors. 
B) only the support of a majority of secured creditors. 
C) the support of a majority of voting creditors in each class representing at least two-thirds of the face value of the debtor's debt in that class. 
D) an absolute majority of all creditors in every class,plus the support of all secured creditors. 
E) at least two-thirds of creditors. 
A) a bare majority of all creditors in every class,plus the support of all secured creditors. 
B) only the support of a majority of secured creditors. 
C) the support of a majority of voting creditors in each class representing at least two-thirds of the face value of the debtor's debt in that class. 
D) an absolute majority of all creditors in every class,plus the support of all secured creditors. 
E) at least two-thirds of creditors. C

Question 3

Tom,Lucinda,and Hye are friends of Ali and make various loans to him so that he can run his falafel-making business.The business requires cash as well as equipment to run.Tom has loaned Ali a stove worth $3000 which,under the terms of the loan agreement,Ali has pledged to return to Tom whenever Tom requests.Lucinda has lent Ali $3000 in cash,and Hye has given Ali 100 kilograms of sesame seeds worth $1000.Ali's obligations to Lucinda and Hye are simply to repay them when he can.In the event of Ali's bankruptcy,which of the following statements is TRUE?

Accepted Answer

A) Tom is considered an unsecured creditor,but Lucinda or Hye are not. 
B) Tom is automatically considered an unsecured creditor,but so are Lucinda and Hye. 
C) Tom is considered a secured creditor,but Lucinda and Hye are not. 
D) The claims of Lucinda and Hye have priority over Tom's. 
E) Tom is a preferred unsecured creditor compared to Lucinda and Hye because he advanced credit first. 
A) Tom is considered an unsecured creditor,but Lucinda or Hye are not. 
B) Tom is automatically considered an unsecured creditor,but so are Lucinda and Hye. 
C) Tom is considered a secured creditor,but Lucinda and Hye are not. 
D) The claims of Lucinda and Hye have priority over Tom's. 
E) Tom is a preferred unsecured creditor compared to Lucinda and Hye because he advanced credit first. C

Question 4

In making a proposal under the Bankruptcy and Insolvency Act,a composition would be most attractive to a creditor where

Accepted Answer

A) the debtor is generally able to pay its debts as they come due. 
B) the creditor will receive more if the debtor is permitted to continue to operate under the proposal,than if the debtor is forced into bankruptcy. 
C) the debtor does not want to part with voting control over the company. 
D) the debtor cannot be trusted to pay its debts. 
E) the debtor has given a security interest to the creditor in assets that,if sold,would yield proceeds exceeding the amount of the debt. 
A) the debtor is generally able to pay its debts as they come due. 
B) the creditor will receive more if the debtor is permitted to continue to operate under the proposal,than if the debtor is forced into bankruptcy. 
C) the debtor does not want to part with voting control over the company. 
D) the debtor cannot be trusted to pay its debts. 
E) the debtor has given a security interest to the creditor in assets that,if sold,would yield proceeds exceeding the amount of the debt.

Question 5

Min,a carpenter,has recently declared bankruptcy.She has one loan for $10 000 and,at the time when the bank calls for repayment,her total assets add up to $9000,which is made up of $3000 in tools,$1200 in clothing,and $800 in furniture.When her assets are distributed,which of the following is true?

Accepted Answer

A) The bank is entitled to all $9000. 
B) The bank is probably only entitled to $4000. 
C) The bank is probably only entitled to $5200. 
D) Min cannot declare bankruptcy,as she does not meet the requirements. 
E) Min will be discharged of all debt. 
A) The bank is entitled to all $9000. 
B) The bank is probably only entitled to $4000. 
C) The bank is probably only entitled to $5200. 
D) Min cannot declare bankruptcy,as she does not meet the requirements. 
E) Min will be discharged of all debt.

Question 6

Noah is a bodybuilder who enters the diet-supplement business.His supplements,GRO-BIG,become popular because they come in the form of chewable bars that can be sold in grocery and convenience stores.GRO-BIG grows very big indeed.Unfortunately,Noah's expenses are high and he has periodic cash flow problems,though he is not insolvent.His creditors are seeking payment.If he wants to retain control of GRO-BIG operations,his best bet would likely be to

Accepted Answer

A) make a proposal to his creditors to liquidate the GRO-BIGbusiness. 
B) encourage one of his creditors to apply for a bankruptcy order. 
C) make an assignment into bankruptcy so that he can extend the time needed to pay his debts. 
D) seek court approval of a scheme of arrangement under the Companies Creditor's Arrangement Act. 
E) make a proposal to the creditors that would give the creditors more if the business operates than if the business is liquidated in bankruptcy. 
A) make a proposal to his creditors to liquidate the GRO-BIGbusiness. 
B) encourage one of his creditors to apply for a bankruptcy order. 
C) make an assignment into bankruptcy so that he can extend the time needed to pay his debts. 
D) seek court approval of a scheme of arrangement under the Companies Creditor's Arrangement Act. 
E) make a proposal to the creditors that would give the creditors more if the business operates than if the business is liquidated in bankruptcy.

Question 7

Josefina runs a house-cleaning business in Kanata,an Ottawa suburb known as "Silicon Valley North" due to its heavy concentration of tech company start-ups.Josefina now has several assistant housekeepers who travel around Kanata from client to client performing housekeeping chores on a half-day basis.Josefina's clients are busy professionals who lead busy lives and are happy to have her do their housework.The last thing that they want to do is to come home and clean.??However,after the tech stock bust many Kanata residents are into coupon-clipping and penny-pinching once again.Josefina's housekeeping services are among the first luxuries to go.As a result,she is now facing the prospect of either assigning herself into bankruptcy,submitting to an application by her creditors for a bankruptcy order or making a proposal.Which option should she choose?

Accepted Answer

This question seeks to examine knowledge

Question 8

A discharge is

Accepted Answer

A) a formal pronouncement by a court that a debtor is released from bankruptcy. 
B) a formal pronouncement by a court that a creditor is released from the stay operating in bankruptcy and may sue the bankrupt independently. 
C) a formal pronouncement by a court permitting the payment of the bankrupt's liquidated assets to creditors. 
D) a formal pronouncement by a court that a debtor is no longer able to carry on business. 
E) an informal pronouncement by the business community that a debtor is no longer able to carry on business. 
A) a formal pronouncement by a court that a debtor is released from bankruptcy. 
B) a formal pronouncement by a court that a creditor is released from the stay operating in bankruptcy and may sue the bankrupt independently. 
C) a formal pronouncement by a court permitting the payment of the bankrupt's liquidated assets to creditors. 
D) a formal pronouncement by a court that a debtor is no longer able to carry on business. 
E) an informal pronouncement by the business community that a debtor is no longer able to carry on business.

Question 9

Wade runs a company that is insolvent and has committed an act of bankruptcy.Last year,his friend,Jacques,went through personal bankruptcy for three months before being discharged.Wade is preparing for the same proceedings that his friend went though.Which of the following should Wade be aware of?

Accepted Answer

A) Unlike his friend,he must have his form of proposal approved by a majority of creditors. 
B) Unlike his friend,he can simply dissolve the company and be absolved of debt. 
C) The company will probably only be discharged from bankruptcy if he pays back all of his debt. 
D) Wade is correct;the bankruptcy will be the same as his friend's. 
E) Wade will have to hire his own trustee,whereas his friend has one assigned to him. 
A) Unlike his friend,he must have his form of proposal approved by a majority of creditors. 
B) Unlike his friend,he can simply dissolve the company and be absolved of debt. 
C) The company will probably only be discharged from bankruptcy if he pays back all of his debt. 
D) Wade is correct;the bankruptcy will be the same as his friend's. 
E) Wade will have to hire his own trustee,whereas his friend has one assigned to him.

Question 10

Civil suits against debtors differ from bankruptcy proceedings because

Accepted Answer

A) they are used only by secured creditors. 
B) they usually involve creditors pursuing individual claims against the debtor. 
C) they cannot be begun without the approval of the trustee in bankruptcy. 
D) they are all dealt with in a single proceeding. 
E) they can only be enforced with the permission of the trustee in bankruptcy. 
A) they are used only by secured creditors. 
B) they usually involve creditors pursuing individual claims against the debtor. 
C) they cannot be begun without the approval of the trustee in bankruptcy. 
D) they are all dealt with in a single proceeding. 
E) they can only be enforced with the permission of the trustee in bankruptcy.

Question 11

Edgar sells tax advice to businesses from a storefront operation in a local shopping mall.His sales efforts were not successful and,as a result,Edgar assigned himself into bankruptcy several months ago.He had the leased premises in the mall,two computers hooked up to a server,a printer,stationery,and books.The business was Edgar's only venture and it is unlikely that he could enter another line of business.As a result,he wants to know what he can keep out of the hands of creditors.

Accepted Answer

A) He can keep all of the office equipment,regardless of its value. 
B) He can keep none of the office equipment,regardless of its value. 
C) He may be able to keep office equipment,provided that it is found to be necessary "tools of the trade" and is worth no more than the allowable provincial exemption. 
D) He may not be able to keep office equipment because this could be used as household furniture. 
E) He may be able to keep the office equipment if it is secured property belonging to a bank that has promised it will not take action against him. 
A) He can keep all of the office equipment,regardless of its value. 
B) He can keep none of the office equipment,regardless of its value. 
C) He may be able to keep office equipment,provided that it is found to be necessary "tools of the trade" and is worth no more than the allowable provincial exemption. 
D) He may not be able to keep office equipment because this could be used as household furniture. 
E) He may be able to keep the office equipment if it is secured property belonging to a bank that has promised it will not take action against him.

Question 12

Name three officials in the bankruptcy process and explain what they do.

Accepted Answer

To begin with,it is important to identif

Question 13

The concept of a stay is most accurately described as

Accepted Answer

A) a requirement that the debtor,once placed in bankruptcy,must stay within the jurisdiction. 
B) a freeze on all of the bankrupt's property pending distribution to creditors. 
C) an order by the court that prevents debtors from counter-suing their creditors during the course of bankruptcy proceedings. 
D) a freeze on creditors' property pending distribution of the bankrupt's estate. 
E) an order by the court that prevents creditors of the debtor from bringing actions against the debtor for pre-bankruptcy debts. 
A) a requirement that the debtor,once placed in bankruptcy,must stay within the jurisdiction. 
B) a freeze on all of the bankrupt's property pending distribution to creditors. 
C) an order by the court that prevents debtors from counter-suing their creditors during the course of bankruptcy proceedings. 
D) a freeze on creditors' property pending distribution of the bankrupt's estate. 
E) an order by the court that prevents creditors of the debtor from bringing actions against the debtor for pre-bankruptcy debts.

Question 14

The debtor-creditor relationship is addressed by both the Bankruptcy and Insolvency Act and various other statutes.Which of the following statements is TRUE?

Accepted Answer

A) As a result of sections 91 and 92 of the Constitution,all of those statutes are enacted by the federal government. 
B) All of those statutes establish various class action procedures that allow for the resolution of all of the debtor's financial difficulties at one time. 
C) The federal Bankruptcy and Insolvency Act is the most important statute dealing with the debtor-creditor relationship of insolvent debtors and applies to all Canadian businesses and individuals. 
D) As a general rule,a judge is entitled to resolve a conflict between the Bankruptcy and Insolvency Act and another statute dealing with the debtor-creditor relationship by asking which piece of legislation provides the fairer result in the circumstances. 
E) The Companies Creditor's Arrangement Act provides an alternative to bankruptcy for all business debtors. 
A) As a result of sections 91 and 92 of the Constitution,all of those statutes are enacted by the federal government. 
B) All of those statutes establish various class action procedures that allow for the resolution of all of the debtor's financial difficulties at one time. 
C) The federal Bankruptcy and Insolvency Act is the most important statute dealing with the debtor-creditor relationship of insolvent debtors and applies to all Canadian businesses and individuals. 
D) As a general rule,a judge is entitled to resolve a conflict between the Bankruptcy and Insolvency Act and another statute dealing with the debtor-creditor relationship by asking which piece of legislation provides the fairer result in the circumstances. 
E) The Companies Creditor's Arrangement Act provides an alternative to bankruptcy for all business debtors.

Question 15

Which of the following is true?

Accepted Answer

A) All bankrupts must first be insolvent. 
B) Bankruptcy requires the debtor to be at least $1000 in debt and have committed an act of bankruptcy. 
C) A bankrupt is never insolvent and an insolvent is never bankrupt. 
D) Bankruptcy is the procedure to wind up the creditor's affairs,paying debtor's and,in some cases,punishing the debtor for their behavior. 
E) Bankruptcy requires a court order of insolvency prior to the court order of receivership. 
A) All bankrupts must first be insolvent. 
B) Bankruptcy requires the debtor to be at least $1000 in debt and have committed an act of bankruptcy. 
C) A bankrupt is never insolvent and an insolvent is never bankrupt. 
D) Bankruptcy is the procedure to wind up the creditor's affairs,paying debtor's and,in some cases,punishing the debtor for their behavior. 
E) Bankruptcy requires a court order of insolvency prior to the court order of receivership.

Question 16

Explain the difference between bankruptcy and insolvency.Your answer should focus on how the two concepts are related,if at all.

Accepted Answer

This question examines the student's und

Question 17

Explain how bankruptcy and insolvency law facilitates the operation of the market for credit in Canada.

Accepted Answer

An important point of Chapter 24 is to i

Question 18

Tae is insolvent and has selected an Official Receiver to aide him in his bankruptcy proceedings.Tae tells the Official Receiver he wants to file a proposal.Which of the following is true?

Accepted Answer

A) Any one of his creditors can still apply for a bankruptcy order. 
B) Only secured creditors can apply for a bankruptcy order. 
C) Tae may include a composition,giving him more time to resolve his debts. 
D) If Tae includes a scheme of arrangement,he must inform his creditors of all actions performed with his assets. 
E) Tae may include a liquidation proposal,which is a similar process to bankruptcy,but with more control for the Tae. 
A) Any one of his creditors can still apply for a bankruptcy order. 
B) Only secured creditors can apply for a bankruptcy order. 
C) Tae may include a composition,giving him more time to resolve his debts. 
D) If Tae includes a scheme of arrangement,he must inform his creditors of all actions performed with his assets. 
E) Tae may include a liquidation proposal,which is a similar process to bankruptcy,but with more control for the Tae.

Question 19

Things have been difficult for Jill during the past few months and she is now contemplating an assignment in bankruptcy.Jill could be found to be a bankrupt by a court if she owes at least a $1000 in debt AND

Accepted Answer

A) moves out of her house but otherwise remains in Canada. 
B) cannot meet her obligations as they become due. 
C) quits her old job. 
D) starts a new job. 
E) votes in an election. 
A) moves out of her house but otherwise remains in Canada. 
B) cannot meet her obligations as they become due. 
C) quits her old job. 
D) starts a new job. 
E) votes in an election.

Question 20

A debtor MUST include in a proposal

Accepted Answer

A) all its creditors and all its property. 
B) all its secured creditors but not all its property. 
C) all its unsecured creditors but not all its property. 
D) whatever creditors the debtor chooses to include in its proposal. 
E) none of its creditors.The debtor does not need to include any existing creditors in a proposal-only those who agree to lend money to the debtor in future. 
A) all its creditors and all its property. 
B) all its secured creditors but not all its property. 
C) all its unsecured creditors but not all its property. 
D) whatever creditors the debtor chooses to include in its proposal. 
E) none of its creditors.The debtor does not need to include any existing creditors in a proposal-only those who agree to lend money to the debtor in future.

Exam 24: Dealing With Bankruptcy and Insolvency

Bankruptcy law is intended to ensure that

In order to gain creditor (as opposed to court)approval for a proposal under the Bankruptcy and Insolvency Act,a proposal must command

In making a proposal under the Bankruptcy and Insolvency Act,a composition would be most attractive to a creditor where

Min,a carpenter,has recently declared bankruptcy.She has one loan for $10 000 and,at the time when the bank calls for repayment,her total assets add up to $9000,which is made up of $3000 in tools,$1200 in clothing,and $800 in furniture.When her assets are distributed,which of the following is true?

A discharge is

Wade runs a company that is insolvent and has committed an act of bankruptcy.Last year,his friend,Jacques,went through personal bankruptcy for three months before being discharged.Wade is preparing for the same proceedings that his friend went though.Which of the following should Wade be aware of?

Civil suits against debtors differ from bankruptcy proceedings because

Name three officials in the bankruptcy process and explain what they do.

The concept of a stay is most accurately described as

The debtor-creditor relationship is addressed by both the Bankruptcy and Insolvency Act and various other statutes.Which of the following statements is TRUE?

Which of the following is true?

Explain the difference between bankruptcy and insolvency.Your answer should focus on how the two concepts are related,if at all.

Explain how bankruptcy and insolvency law facilitates the operation of the market for credit in Canada.

Tae is insolvent and has selected an Official Receiver to aide him in his bankruptcy proceedings.Tae tells the Official Receiver he wants to file a proposal.Which of the following is true?

Things have been difficult for Jill during the past few months and she is now contemplating an assignment in bankruptcy.Jill could be found to be a bankrupt by a court if she owes at least a $1000 in debt AND

A debtor MUST include in a proposal

Risk Management and Sources of Law

Litigation and Alternative Dispute Resolution

Introduction to Torts

Intentional Torts

Miscellaneous Torts Affecting Business

Negligence

The Nature and Creation of Contracts

Consideration and Privity

Representations and Terms

Contractual Defects

Discharge and Breach

Contractual Remedies

Special Contracts: Sale of Goods

Special Contracts: Negotiable Instruments

Real Property: Interests and Leases

Real Property: Sales and Mortgages

Personal Property: Bailment and Insurance

Intellectual Property

Electronic Commerce

Agency and Other Methods of Carrying on Business

Basic Forms of Business Organizations

Legal Rules for Corporate Governance

Secured Transactions

Government Regulation of Business

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