Exam 21: Bankruptcy and Debt Adjustment

Judy's Print Shop has filed for a Chapter 11 bankruptcy, and Judy wonders if her creditors, with whom she has had an increasingly abrasive relationship, will have any say in her reorganization plan. Discuss the role of the creditors in a Chapter 11 reorganization.

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Question 1

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When a Chapter 11 bankruptcy petition is filed, Judy's Print Shop may also file a reorganization plan. A primary committee, consisting of the creditors who hold the seven largest unsecured claims, will work with Judy's Print Shop on a reorganization plan. For the reorganization plan to go into effect, it must be approved by the creditors. Hence, it can be said that Judy's creditors have a considerable say in the reorganization.

Morgan and Flynn owned a partnership business that was facing financial difficulties. The debts of the business were getting out of hand. However, neither Morgan nor Flynn wanted to close down the business and felt that, with a few changes, they could turn the business around and make a profit. Which chapter of the Bankruptcy Code should they file under? Why?

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Morgan and Flynn should file under Chapter 11 of the Bankruptcy Code reorganization. Chapter 11 provides for businesses to reorganize their financial affairs and still remain in business. Debtors can retain control of their business as a "debtor in possession" while the debts are being reorganized. Morgan and Flynn cannot use the Chapter 13 provision because it is open to individuals only. Neither can they use Chapter 12 because it is open to family farmers only.

In a voluntary filing, the bankruptcy petition itself becomes the order for relief.

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Question 3

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True

Barnaby is a farmer who receives two-thirds of his total income from the sale of oranges. After two consecutive years of early frosts that destroyed his orange harvest, Barnaby found himself deep in debt. Seventy percent of his debt resulted from farm expenses. Can he file for Chapter 12 bankruptcy? Why or why not?

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Question 4

Joan's bankruptcy proceeding consists of the following debts: back taxes of $10,000, credit card debt of $25,000, home utility bills of $300, and a $10,000 car loan. Also, there are bankruptcy administrative expenses of $1,000. Discuss the order in which these debts will be settled.

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Question 5

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

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Question 6

The debtor can discharge any cash advances-up to $2,500-paid to a creditor under an open-ended credit plan.

(True/False)

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Question 7

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?

(Multiple Choice)

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Question 8

Stan has debt problems. He has unpaid alimony and child support payments. Big Bank is threatening to repossess his car because he is behind on his payments, and a variety of creditors are threatening to sue. He wants to discharge most of his debts and begin with a clean slate. Discuss what action will help Stan's situation.

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Question 9

Chapter 7 bankruptcy petitions are filed in state district courts that are within the federal court structure.

(True/False)

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Question 10

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

(Multiple Choice)

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Question 11

Under the Bankruptcy Code, states are allowed to use exemptions created by the state legislature, rather than the federal exemptions.

(True/False)

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Question 12

A Chapter 11 disclosure statement must be approved by the court before there can be a vote by creditors on the reorganization plan.

(True/False)

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Question 13

Creditors may be able to force debtors, such as farmers, into involuntary Chapter 7 bankruptcy if the debtor fails to pay bills generally as they become due.

(True/False)

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Question 14

Once the amounts agreed to under a Chapter 13 plan are paid, all remaining debts are discharged.

(True/False)

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Question 15

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):

(Multiple Choice)

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Question 16

Under the first federal bankruptcy law in the United States, enacted in 1800, only creditors could begin a bankruptcy proceeding and only merchants could qualify as debtors.

(True/False)

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Question 17

According to the priority list of property distribution in the Bankruptcy Code, administrative expenses incurred during the administration of bankruptcy are paid before secured debts.

(True/False)

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Question 18

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.

(Multiple Choice)

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Question 19

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

(Multiple Choice)

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Question 20

Showing 1 - 20 of 49

Exam 21: Bankruptcy and Debt Adjustment

Judy's Print Shop has filed for a Chapter 11 bankruptcy, and Judy wonders if her creditors, with whom she has had an increasingly abrasive relationship, will have any say in her reorganization plan. Discuss the role of the creditors in a Chapter 11 reorganization.

In a voluntary filing, the bankruptcy petition itself becomes the order for relief.

Joan's bankruptcy proceeding consists of the following debts: back taxes of $10,000, credit card debt of $25,000, home utility bills of $300, and a $10,000 car loan. Also, there are bankruptcy administrative expenses of $1,000. Discuss the order in which these debts will be settled.

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

The debtor can discharge any cash advances-up to $2,500-paid to a creditor under an open-ended credit plan.

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?

Chapter 7 bankruptcy petitions are filed in state district courts that are within the federal court structure.

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

Under the Bankruptcy Code, states are allowed to use exemptions created by the state legislature, rather than the federal exemptions.

A Chapter 11 disclosure statement must be approved by the court before there can be a vote by creditors on the reorganization plan.

Creditors may be able to force debtors, such as farmers, into involuntary Chapter 7 bankruptcy if the debtor fails to pay bills generally as they become due.

Once the amounts agreed to under a Chapter 13 plan are paid, all remaining debts are discharged.

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):

Under the first federal bankruptcy law in the United States, enacted in 1800, only creditors could begin a bankruptcy proceeding and only merchants could qualify as debtors.

According to the priority list of property distribution in the Bankruptcy Code, administrative expenses incurred during the administration of bankruptcy are paid before secured debts.

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.

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

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