Deck 21: Bankruptcy Law: in Theory, in History, and in Practice

Question 1

Under Chapter 11,the debtor becomes a debtor in possession and continues to operate performing most of the functions of bankruptcy judge.

Answer 1

False

Question 2

A Chapter 13 petition must include a repayment plan,but priority debtors can be paid at a discount,with different rates and times.

Answer 2

False

Question 3

Chapter 11 reorganizations are only available to legal entities such as partnerships and corporations.

Answer 3

False

Question 4

Once a Chapter 12 plan is created,the trustee holds a confirmation hearing with creditors who either vote to confirm or deny the plan.

Question 5

The question of whether to establish a federal bankruptcy law was the central issue in the case of Hanover National Bank v.Max Moyses in 1902.

Question 6

Under the new Bankruptcy Code,alimony,child support,and Social Security payments are exempt up to an aggregate of $25,000 per year.

Question 7

Chapter 7 bankruptcy petitions are filed in special bankruptcy courts within the federal court structure.

Question 8

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.

Question 9

Under Chapter 13,agencies charged with collecting and recovering unpaid child-support payments are allowed to continue such efforts despite the bankruptcy filing.

Question 10

The Bankruptcy Code allows debtors to maintain a minimum standard of living by exempting certain necessary items of property,including for example,professional tools,and medical supplies.

Question 11

When a Chapter 11 petition is filed,the debtor has 120 days to file a reorganization plan,which must be in conformity with the creditors and accepted by the bankruptcy court.

Question 12

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),Congress created a system that would require more debtors to file under Chapter 7 rather than Chapter 13.

Question 13

When a petition is filed,an automatic stay goes into effect which postpones ALL collection proceedings against the debtor.

Question 14

The first step in the 'means test' is to compare the debtor's average income during the previous six months with the median income for a family of that size in the United States.

Question 15

Chapter 12 sets a $4,153,150 debt ceiling for farmers and is available to partnerships and corporations regardless of stock ownership.

Question 16

The final step to determine whether a debtor will be able to file a bankruptcy petition for Chapter 7 or not,is a determination as to whether the debtor has the ability to pay unsecured debts over a three-year period.

Question 17

To be eligible for Chapter 13,debtors must first meet with an approved nonprofit credit counselor and have unsecured debts of less than $400,000.

Question 18

Under a Chapter 13,creditors can force an involuntary bankruptcy filing if the debtor has a steady income.

Question 19

People who are able to make a down payment and have a steady income may become eligible for a mortgage loan as soon as five years following a discharge in bankruptcy.

Question 20

In a voluntary bankruptcy filing,the bankruptcy petition itself becomes the order for relief and is effective the moment it is filed with the court.

Question 21

Which of the following is a duty vested in a trustee by the court,when the debtor is a business and files a Chapter 7 petition?

A)He may be authorized to operate the business for a limited period of time.
B)He may be authorized to make payments made by the debtor within 90 days before the filing of the petition.
C)He may be authorized to sell the debtor's properties and hand over the proceeds of the sales to the debtor.
D)He may be authorized to pay off the debts according to the personal priority list.

Question 22

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):

A)debtor in bankruptcy.
B)debtor in possession.
C)unimpaired debtor.
D)suspended debtor.

Question 23

Vernon owns a family run farming business.He earned $100,000 in the current financial year.He owes $70,000 that he cannot pay.This debt forms a part of his farm expenses to creditors,but he wants to keep the business running.Which type bankruptcy should Vernon file for?

A)Chapter 7 only
B)Chapter 11 and Chapter 7
C)Chapter 7 and Chapter 12
D)Chapter 12

Question 24

Of the groups listed below,only ________ can take advantage of Chapter 13 provisions.

A)self-employed people
B)corporations
C)partnerships
D)educational institutions

Question 25

Stan commits securities fraud and takes $5,000,000 from a variety of investors.Stan is convicted of a crime and then sued by the investors.Stan files for bankruptcy.What relief will the bankruptcy filing grant Stan?

A)Automatic stay on all cash advances paid to a creditor under an open-ended credit plan
B)Automatic stay and discharge of any debt created with the securities fraud
C)Automatic stay,but no discharge of any debt created by the securities fraud
D)Automatic stay and discharge of all debts incurred

Question 26

Which of the following provides a system in which debtors are forced to sell most of their property and use the cash to pay their creditors a portion of the amount owed each one?

A)Family Farmer or Fishing Business Debt Adjustment
B)Reorganization
C)Liquidation
D)Individual Debt Adjustment

Question 27

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.

A)7
B)11
C)12
D)13

Question 28

A(n)________ is a self-operating postponement of collection proceedings against the debtor,which goes into effect the moment the order for relief occurs.

A)federal exemption
B)involuntary petition
C)automatic stay
D)means test

Question 29

Under Chapter 13 of the Bankruptcy Code,a debtor must begin payments within a period of ________ from submission.

A)three days
B)thirteen days
C)thirty days
D)thirty-three days

Question 30

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

A)commodity brokers and stockbrokers.
B)chartered accountants.
C)lawyers and judges.
D)real estate developers.

Question 31

Which chapter of the bankruptcy code allows a federal homestead exemption?

A)Chapter 11
B)Chapter 7
C)Chapter 8
D)Chapter 12

Question 32

Under Chapter 13 of the Bankruptcy Code,what happens if the debtor submits the repayment plan to the court,but the court has yet to hold its hearing?

A)The debtor is not required to start payments within the stipulated period of thirty days.
B)The debtor makes the payments to the trustee.
C)The debtor makes payments individually to the creditors.
D)The debts of the debtor are discharged.

Question 33

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

A)Involuntary filings are permitted.
B)The debtor should be able to pay the entire amount they owe to each creditor.
C)The debtor must have an already established steady income.
D)Corporations and partnerships can file.

Question 34

Trudy has a steady income,but is behind on her payment of debts.Trudy wants to pay her debts,but needs some relief from her creditors.Discuss what type of Bankruptcy Procedure would best fit her case.

Question 35

The maximum time period that is allowed for Chapter 13 debtors to complete the payment plan is ________ years.

A)eight (8)
B)ten (10)
C)five (5)
D)twelve (12)

Question 36

In a ________,a qualified debtor creates a plan that alters the repayment schedule.

A)firm offer
B)requirements contract
C)reorganization
D)contract for sale

Question 37

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?

A)Carmel Enterprises only
B)Carmel Enterprises and David only
C)Carmel Enterprises,Sigma Enterprises,David,and Vulcan Co.
D)Sigma Enterprises,David and Vulcan Co.only

Question 38

Under the 2005 Bankruptcy Act,debtors are required to meet which of the following conditions file for Chapter 7 bankruptcy?

A)They must provide a federal income tax return for the most recent tax year.
B)Their income should be more than the state median income.
C)They must be involved in a fishing or farming business.
D)They should be commodity brokers or stock brokers.

Question 39

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

A)debtor in possession.
B)creditor in possession.
C)case trustee.
D)primary trustee.

Question 40

In 1978,Chapters 11 and 13 of the Bankruptcy Code were created,which:

A)made it easier for creditors to obtain bankruptcy relief.
B)allowed businesses and individuals to reorganize and keep going.
C)made it more difficult to declare bankruptcy.
D)allowed creditors to keep all of the debtor's assets.

Question 41

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.

Question 42

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.

Question 43

Josh,a college student,has been told by his friends that filing for bankruptcy after graduation will discharge all his student loans.Discuss if this is correct.

Question 44

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.

Question 45

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?

Question 46

Fritz is a professional painter and owns a truck worth $10,000 and tools worth $3,000.He owns a very modest house worth $17,000.He has numerous unsecured debts totaling $500,000 and considers filing for bankruptcy.Discuss the bankruptcy alternatives for Fritz.

Question 47

Tom has filed for a Chapter 13 bankruptcy and one of his creditors is attempting to organize the other creditors into a group to petition the bankruptcy judge to allow them to prepare a debt readjustment plan for Tom.Will the bankruptcy judge allow this action by creditors?

Question 48

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?

Question 49

Overwhelmed by his debt,Jaime decided that he would file for Chapter 7 bankruptcy the following month.Fifteen days before he filed,Jaime took out a $3,000 cash advance on one of his credit cards,and used the money to purchase and install a hot tub in his bathroom.Jaime believed that he would be able to discharge the debt for the hot tub when he went through the bankruptcy proceeding.Was he correct in his belief? Why or why not?