Deck 24: Bankruptcy and Reorganization

Question 1

Which of the following is a feature of the Helping Families Save Their Home Act of 2009?

A) It prevents debtors from seeking mortgage modification while in an active bankruptcy case.
B) It allows mortgage lenders to file a claim in a bankruptcy case if the lender has failed to comply with the requirements.
C) It states that debtors with total mortgage debt of more than $1,010,000 are not eligible for a Chapter 13.
D) It eliminates the need for prepetition credit counseling before a debtor may file for bankruptcy.

Answer 1

D

Question 2

Bankruptcy proceedings are commenced under ________.

A) state law
B) federal law
C) county law
D) state or federal law, at the option of the debtor

Answer 2

B

Question 3

A bankruptcy trustee is a ________.

A) legal representative of a debtor's estate
B) claimant to the debtor's estate on behalf of a creditor
C) federal government official responsible for supervising a bankruptcy case
D) bankruptcy judge, appointed by a U.S. Bankruptcy Court

Answer 3

A

Question 4

Which of the following is true of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?

A) It made it easier for debtors to be relieved of much of their debt.
B) It made it much more difficult for debtors to escape with their debts.
C) It was criticized for being too debtor friendly.
D) It was enacted as a result of lobbying by consumer groups and home owners.

Question 5

Which of the following is true of discharge of debt?

A) A debtor is legally liable to pay a partial amount of the discharged debts.
B) All kinds of debts are dischargeable in a bankruptcy procedure.
C) A creditor cannot pursue nondischarged debts after the debtor's bankruptcy.
D) A debtor is not legally liable to pay the discharged debts.

Question 6

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

A) discharge of debt
B) composition
C) automatic stay
D) order for relief

Question 7

Which of the following best defines a proof of claim?

A) a statement by the debtor that states that he or she has debts
B) a document required to be filed by a debtor stating the property that is exempted from constituting the bankruptcy estate
C) a document required to be filed by a creditor that states the amount of his or her claim against the debtor
D) a statement by creditors alleging that the debtor is not paying his or her debts as they become due

Question 8

A(n)________ is a document required to be filed by an equity security holder that states the amount of his or her interest against the debtor.

A) proof of claim
B) proof of interest
C) voluntary petition
D) involuntary petition

Question 9

Which of the following is true of the bankruptcy procedure?

A) A driven petition is a petition filed by a debtor that states that he or she has debts.
B) A debtor must receive prepetition credit counseling within 180 days prior to filing his or her petition for bankruptcy.
C) A voluntary petition is filed by creditors of a debtor, alleging that the debtor is not paying his or her debts as they become due.
D) A complaint is a document filed with a bankruptcy court that starts a bankruptcy proceeding.

Question 10

Sam wants to file a petition for bankruptcy.Which of the following is true in this context?

A) Sam need not submit a list of creditors; it is obtained by the court upon investigation.
B) Sam's bankruptcy petition cannot be filed electronically.
C) Only Sam's attorney can file his bankruptcy petition.
D) Sam's attorney is liable for perjury if information filed by Sam is incorrect.

Question 11

Which of the following is true of the meeting of the creditors?

A) A meeting of the creditors is called before the court grants an order for relief.
B) The bankruptcy judge cannot attend the meeting of the creditors.
C) In the first meeting of the creditors, a debtor is questioned by a jury constituted for the purpose.
D) Questions regarding the debtor's possible concealment of assets are not permitted during the meeting of the creditors.

Question 12

The filing of either a voluntary petition or an unchallenged involuntary petition constitutes a(n)________.

A) prayer for relief
B) discharge
C) order for relief
D) composition

Question 13

The bankruptcy estate is created upon the ________ of a bankruptcy case.

A) commencement
B) continuance
C) termination
D) discharge

Question 14

A(n)________ is an agreement entered into by the creditor and the debtor whereby the debtor agrees to pay the creditor for a debt that is dischargeable in bankruptcy.

A) reaffirmation agreement
B) order for relief
C) discharge agreement
D) acceptance agreement

Question 15

Which of the following is true of bankruptcy laws in the United States?

A) The U.S. Securities and Exchange Commission has the power to establish uniform bankruptcy laws.
B) The bankruptcy law in the United States differs from state to state.
C) The original federal Bankruptcy Act was enacted in 1878.
D) The states have the right to amend bankruptcy laws whenever they want.

Question 16

Why is a discharge of debt granted?

A) to divide the bankruptcy estate equally among all creditors
B) to relieve the debtor of the responsibility to pay some of or all the debt
C) to divide the bankruptcy estate according to the debt owed to each creditor
D) to suspend certain legal actions by creditors against a debtor's property

Question 17

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires an individual filing for bankruptcy to receive ________.

A) prepetition counseling
B) postpetition counseling
C) prepetition or postpetition counseling
D) prepetition and postpetition counseling

Question 18

Which of the following is true of the 1978 bankruptcy law in the United States?

A) It made it easier for debtors to be relieved of much of their debt.
B) It was deemed to be "creditor friendly."
C) It prevented debtors from escaping their unsecured debts.
D) It was enacted as a result of lobbying by credit card companies and banks.

Question 19

Which of the following is true of a debtor's bankruptcy estate?

A) Only intangible personal property constitutes the bankruptcy estate.
B) No property solely owned by the debtor is exempted from constituting the bankruptcy estate.
C) Creditors are allowed to claim exempt property.
D) All interests of a debtor's spouse are included in the bankruptcy estate.

Question 20

Chapter 7 of the Bankruptcy Code of the bankruptcy act of 2005 primarily deals with ________.

A) reorganization
B) adjustment of debts of a family farmer or fisherman with regular income
C) adjustment of debts of an individual with regular income
D) liquidation

Question 21

One of the purposes of the ________ is to force many debtors out of Chapter 7 bankruptcy and into Chapter 13 bankruptcy.

A) Federal Bankruptcy Act of 1878
B) Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
C) Families Save Their Homes Act of 2009
D) Federal Bankruptcy Act of 1978

Question 22

If the value of the collateral securing the secured loan exceeds the secured interest,the secured creditor is ________.

A) an undersecured creditor
B) an oversecured creditor
C) not liable for loan repayment
D) not qualified for Chapter 7 bankruptcy

Question 23

________ is a form of bankruptcy that permits bankruptcy courts to supervise the debtor's plan for the payment of unpaid debts in installments over the plan period.

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

Question 24

Which of the following reasons can be used to file an objection to the discharge of a debt?

A) huge amount of unsecured debts by the debtor
B) lack of real property to cover the debts incurred
C) poor credit score of the debtor
D) misrepresentation of financial condition

Question 25

The ________ is a bankruptcy rule that applies to a debtor who has a median family income that exceeds the state's median family income for families the same size as the debtor's family.

A) means test
B) median income test
C) Chapter 13 discharge
D) Chapter 13 plan of payment

Question 26

Which of the following is a federal exemption that a debtor can claim under the Bankruptcy Code?

A) interest in jewelry worth $1,000
B) unmatured life insurance policy owned by the debtor
C) interest in wrongful death benefits
D) interest of $3,500 in a motor vehicle

Question 27

The means test is used to determine whether ________.

A) the debtor's median family income is less than the state's median family income
B) the debtor's median family income is more than the state's median family income
C) the debtor has the capability to pay prepetition debts out of postpetition income
D) the debtor would qualify to file for bankruptcy under Chapter 13

Question 28

As changed in the 2005 Act,which of the following are the first unsecured claims to be paid?

A) claims for contributions to employee benefit plans based on services performed within 180 days immediately preceding the filing of the petition
B) claims for unpaid income and gross receipt taxes owed to governments
C) claims for cash deposited by a consumer with the debtor prior to the filing of bankruptcy petition
D) claims for domestic support owed to the spouse, former spouse, or child of the debtor

Question 29

What is a homestead exemption?

A) investment in realty that a debtor must forfeit
B) equity in a home that a debtor is permitted to retain
C) remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims
D) all of the debtor's assets converted to cash

Question 30

Which of the following is true of the median income test?

A) If a family has median family income equal to the state's median family income, the debtor does not qualify for Chapter 7 bankruptcy.
B) If a family has median family income below the state's median family income, the debtor is subject to the "means" test.
C) If a family has median family income below the state's median family income, the debtor automatically qualifies for Chapter 7 bankruptcy.
D) A debtor's debts are not discharged if the family median income is more than the state's median family income.

Question 31

Which of the following is true of Chapter 7 liquidation?

A) The debtor is not permitted to keep any of his or her assets.
B) The 2005 bankruptcy act has eased the process of applying for Chapter 7 bankruptcy.
C) The debtor's future income cannot be reached to pay the discharged debt.
D) Petitioning for Chapter 7 liquidation does not permit the debtor to petition for bankruptcy under any other chapter.

Question 32

________ property may be retained by a debtor pursuant to federal and state law that does not become part of the bankruptcy estate.

A) Secured
B) Unsecured
C) Exempt
D) Collateral

Question 33

Which of the following is also referred to as straight bankruptcy?

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

Question 34

________ is a rehabilitation form of bankruptcy for individuals.

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

Question 35

What is Chapter 7 discharge?

A) The termination of the legal duty of an individual debtor to pay both secured and unsecured debts before he or she is granted a court trial.
B) The termination of the legal duty of an individual debtor to pay unsecured debts that remain unpaid upon the completion of a Chapter 7 proceeding.
C) The cancellation of all debts of a debtor that remain unpaid upon the completion of a Chapter 13 proceeding.
D) An instruction to the debtor to propose a plan to pay all or a portion of the debts he or she owes in installments.

Question 36

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash,the cash is distributed to the creditors,and any unpaid debts are discharged.

A) Abusive filing
B) Dissolution of debt
C) Liquidation
D) Reorganization

Question 37

How does the 2005 act reduce the number of debtors who qualify for Chapter 7 liquidation bankruptcy?

A) It added two new tests, the median income test and the means test, to determine whether a debtor qualifies.
B) It used the employment history of debtors to determine their approximate postpetition income.
C) It used new methods to determine whether the debtors are providing False information regarding their financial position.
D) It made the Chapter 7 liquidation procedures tougher in order to discourage debtors from opting for it.

Question 38

Kate is granted a Chapter 7 discharge after filing for bankruptcy.However,she still has about $20,000 of unsecured debt in the form of credit card debt.Which of the following is true in this case?

A) Kate is liable to pay the debt with her exempt property.
B) Kate is liable to pay the money with her postpetition income.
C) Kate is legally relieved of this debt.
D) Kate is liable to pay the debt with her future earnings.

Question 39

Under the 2005 bankruptcy act,if a nonexempt personal property of an individual debtor secures a claim or is subject to an unexpired lease,the debtor ________.

A) must surrender the property
B) can appeal for exemption of the property
C) must terminate the lease with immediate effect
D) cannot redeem the property

Question 40

According to the 2005 bankruptcy act,when is a debtor granted Chapter 7 relief?

A) six years following Chapter 11 relief
B) four years following Chapter 11 relief
C) six years following Chapter 12 relief
D) three years following Chapter 13 relief

Question 41

For debtors,which of the following is an advantage of Chapter 13 over Chapter 7?

A) It grants discharge of debt incurred prior to the date of the order for relief.
B) It allows debtors to start a new life without the burden of prepetition debts.
C) It prevents debtors from paying prepetition debts out of postpetition income.
D) It helps debtors retain more property than is exempt under Chapter 7.

Question 42

A(n)________ provision is a provision whereby the court confirms a plan of reorganization over an objecting class of creditors if certain requirements are met.

A) cram-down
B) acceptance
C) discharge
D) liquidation

Question 43

Which of the following constitutes the property of a Chapter 13 estate?

A) nonexempt property of the debtor before the case is closed
B) exempt property of the debtor before the case is closed
C) debtor's income before and after the case is closed
D) property that is exempt from Chapter 7 estate

Question 44

A major benefit of ________ bankruptcy is that the debtor is given the opportunity to accept or reject certain executory contracts and unexpired leases.

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

Question 45

Paulo Dessario is the owner of Paulo's Pizzeria,which has not been doing well in the last year.He files for bankruptcy under Chapter 13.Which of the following is true in accordance with the constitution of the Chapter 13 estate?

A) Paulo must terminate all his business operations in the United States.
B) If the pizzeria is not exempt from Chapter 13 estate, Paulo must surrender it.
C) Paulo is allowed to continue operating the pizzeria, irrespective of it being exempt.
D) Paulo can only operate the pizzeria but cannot remain in possession of it.

Question 46

In a Chapter 11 bankruptcy,the creditors' committee is usually composed of ________.

A) all unsecured creditors and the three largest secured creditors
B) the seven largest unsecured creditors
C) the seven largest unsecured creditors, and all secured creditors
D) the three largest secured creditors and the three largest unsecured creditors

Question 47

A person filing for bankruptcy under Chapter 11 and left in place to operate the business during the reorganization proceeding is known as the ________.

A) trustee-in-possession
B) debtor-in-possession
C) consignor
D) regent

Question 48

Which of the following is true of Chapter 11 discharge of debts?

A) Equal amounts of secured and unsecured debt can be discharged based on a debtor's proposal.
B) The entire unsecured debt can be discharged based on a debtor's proposal.
C) Discharge of a portion of unsecured debt by a debtor is permitted to make its plan of organization feasible.
D) Discharged debt need to be repaid from the postpetition income of a debtor.

Question 49

Which of the following bankruptcy methods allows the reorganization of the debtor's financial affairs under the supervision of the bankruptcy court?

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

Question 50

Which of the following is a feature of the Chapter 11 plan of reorganization?

A) an equilateral division of the Chapter 11 estate among all creditors
B) division of the bankruptcy estate according to the debt to be paid to each creditor
C) discharge of a debtor's unsecured debts and payment of secured debts
D) a proposed new capital structure for a debtor to assume when it emerges from Chapter 11 bankruptcy

Question 51

Techtel Corp.has $25 million in secured debt and $10 million in unsecured debt.After a series of quarterly losses,the company files for Chapter 11 bankruptcy.Techtel proposes a plan of reorganization,which discharges about 60 percent of its unsecured debt.Which of the following would happen upon the bankruptcy court's approval of the proposed plan of reorganization?

A) Techtel will be liable to pay the discharged unsecured debt after eliminating its secured debt.
B) Techtel will be liable to pay 40 percent of its unsecured debt on a pro-rata basis.
C) Techtel will be allowed to discharge a significant percent of its secured debt, as well.
D) Techtel will be allowed to propose a new plan of payment after a few months to discharge the remaining 40 percent of its unsecured debt.

Question 52

Which of the following is true of Chapter 11 of the Bankruptcy Code?

A) Chapter 11 is a rehabilitation form of bankruptcy that permits bankruptcy courts to supervise the debtor's plan for the payment of unpaid debts.
B) Chapter 11 petition filing immediately enables creditors to recover the debtor's property.
C) Chapter 11 helps the debtor reorganize with a new capital structure so that the debtor emerges from bankruptcy as a viable concern.
D) Chapter 11 does not permit a debtor to reject executory contracts or unexpired leases.

Question 53

What is an executory contract?

A) a contract that cannot be rejected under Chapter 11
B) a contract that the debtor is obliged to perform despite filing for bankruptcy
C) an agreement between several creditors and a single debtor, dividing the debtor's property
D) a contract that has not been fully performed

Question 54

Which of the following is true of Chapter 13 plan of payment?

A) It does not require a debtor to disclose his or her estimated income during their period of plan.
B) It must be filed not later than 90 days after the order for relief.
C) The plan of payment is summarily rejected if a secured creditor does not accept the plan.
D) The plan of payment is summarily rejected if an unsecured creditor does not accept the plan.

Question 55

For creditors,which of the following is an advantage of Chapter 13 over Chapter 7?

A) It allows them to recover a greater percentage of the debts owed to them.
B) It doesn't permit debtors to discharge even a small portion of unsecured debt.
C) It permits creditors to get hold of the exempt and nonexempt properties of debtors.
D) It ensures instant repayment of the debt without any delay.

Question 56

Which of the following is true of a Chapter 13 petition?

A) It can be filed by all individual debtors, irrespective of their income status.
B) The petitioner need not demand an extension or composition.
C) To qualify for Chapter 13, the debts must primarily be consumer debt.
D) Creditors can file a Chapter 13 petition claiming payment from a debtor.

Question 57

Which of the following is true of Chapter 13 discharge?

A) It is granted before a Chapter 13 plan of payment is enforced.
B) It is not granted if the debtor has received Chapter 7 discharge in the last four years.
C) It is granted after the completion of payment plan duration, irrespective of the debts covered.
D) It relieves the debtor of all unpaid taxes.

Question 58

The United States Bankruptcy Code permits a "small business," defined as one with total debts of less than ________,to use a simplified,fast-track form of Chapter 11 reorganization bankruptcy.

A) $1,000,000
B) $1,343,300
C) $2,000,000
D) $2,343,300

Question 59

A(n)________ provides for the reduction of a debtor's debts.

A) extension
B) liquidation
C) limitation
D) composition

Question 60

Which of the following does a Chapter 11 automatic stay provide?

A) automatic discharge of secured debts
B) suspension of certain legal actions against the debtor
C) creditors' foreclosure on assets given as collateral for loans
D) automatic discharge of unsecured debts

Question 61

If the value of the collateral securing the secured loan exceeds the secured interest,the secured creditor is referred to as an undersecured creditor.

Question 62

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 is considered to be "debtor friendly."

Question 63

Discharge of unsatisfied debts can be denied if the debtor made False representations about his or her financial position.

Question 64

The debtor is not allowed to have an attorney during the first meeting of the creditors.

Question 65

Creditors have the legal right to claim at least half of the debtor's exempt property.

Question 66

A bankruptcy trustee is a legal representative of the debtor's estate.

Question 67

It is not possible for an individual to file bankruptcy petitions without the assistance of an attorney.

Question 68

According to the 2005 act,a debtor can be granted Chapter 7 relief only after four years of following Chapter 7 relief.

Question 69

A proof of claim is a document required to be filed by a creditor that states the amount of his or her claim against the debtor.

Question 70

When discharge is granted,the debtor is legally liable to pay a partial amount of the discharge debts.

Question 71

The 2005 bankruptcy act requires that before an individual debtor receives a discharge in a Chapter 7 or Chapter 13 bankruptcy,the debtor must attend a personal financial management course approved by the U.S.Trustee.

Question 72

The Helping Families Save Their Homes Act of 2009 doesn't permit debtors to seek mortgage modification while in an active bankruptcy case.

Question 73

Chapter 7 liquidation bankruptcy requires debtors to pay some of their future income to pay off prepetition debts.

Question 74

The median income test and the means test are used to determine whether a debtor qualifies to obtain a discharge of debts under Chapter 7.

Question 75

Chapter 7 liquidation bankruptcy is also known as straight bankruptcy.

Question 76

The individual debtor is not responsible for paying prepetition debts out of postpetition income under a Chapter 7 discharge.

Question 77

The attorney representing a debtor is subject to monetary fines and sanctions if there are any factual discrepancies found in the debtor's information.

Question 78

A reaffirmation agreement must be entered into after discharge is granted.

Question 79

Chapter 7 discharge is granted quite soon after the bankruptcy petition is filed.

Question 80

The Helping Families Save Their Homes Act of 2009 was enacted to provide ways for some homeowners to easily retain their homes and prevent foreclosure.