Deck 28: Bankruptcy and Reorganization

Question 1

An involuntary petition for bankruptcy is filed by a creditor,or creditors,and places the debtor into bankruptcy.

Answer 1

True

Question 2

The debtor's bankruptcy estate is limited to tangible items.

Answer 2

False

Question 3

One advantage of the Bankruptcy Reform Act of 2005 is that it decreased the number of bankruptcy judges to handle bankruptcy cases,as the number of overall bankruptcy cases has decreased.

Answer 3

False

Question 4

The bankruptcy judge may attend the first meeting of creditors.

Question 5

The two most common types of bankruptcy filed by businesses are liquidation and reorganization.

Question 6

A homestead exemption refers to the equity in a debtor's home that he or she is allowed to retain.

Question 7

A secured creditor may also be an unsecured creditor if the value of a creditor's claim exceeds the value of a debtor's collateral for the debt owed to the creditor.

Question 8

A fraudulent transfer of a debtor's property may not be voided by the bankruptcy court.

Question 9

The United States Trustee may perform many of the tasks that the bankruptcy judge had previously performed.

Question 10

One of the goals of federal bankruptcy law is to give debtors a chance at a fresh start financially.

Question 11

The founders of the United States thought the plight of debtors was so important that they included a provision in the U.S.Constitution on bankruptcy.

Question 12

The effect of an automatic stay is to suspend certain legal actions by creditors against the debtor or the debtor's property.

Question 13

Amounts owed to a pension plan are dischargeable in bankruptcy.

Question 14

The Bankruptcy Reform Act of 1978 favored creditors,as it made it more difficult for debtors to escape from their debts under federal bankruptcy law.

Question 15

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it easier for debtors to escape from their debts under federal bankruptcy law.

Question 16

Under the 2005 Act,a debtor may be given only a partial fresh start as he or she may have to pay more of his or her pre-petition bankruptcy debts out of post-petition earnings.

Question 17

Attorneys may be fined for factual discrepancies under the new bankruptcy reform act.

Question 18

In addition to federal bankruptcy laws,there are individual state bankruptcy laws as well.

Question 19

An unmatured life insurance policy owned by the debtor is exempt from the bankruptcy estate.

Question 20

Bankruptcy cases are heard in federal court.

Question 21

If a debtor makes a bona fide payment of a debt for a domestic support obligation,then it will not be considered to be a fraudulent payment.

Question 22

In a Chapter 7 bankruptcy,a trustee must be appointed.

Question 23

The term "median income" refers to that income where half of the state's families have income above the debtor's family income and half of the state's families have income below the debtor's family income.

Question 24

Only individuals may file a petition under Chapter 13 of the Bankruptcy Code.

Question 25

In a voluntary Chapter 7 bankruptcy petition,the debtor must list all property owned,including any exempt property.

Question 26

One way to determine whether or not a fraudulent transfer has been made is to look at the time frame in which the transfer was made.

Question 27

Personal property that is subject to an unexpired lease and is not exempt must be surrendered by the debtor,redeemed by paying the secured lien in full or the debtor must assume the unexpired lease.

Question 28

The bankruptcy court may now void certain fraudulent transfers of the debtor's property and obligations incurred by the debtor within 2 years of the filing of the petition for bankruptcy.

Question 29

The 2005 Bankruptcy Act bars the discharge of student loans unless it would cause an "undue hardship" to the debtor on his or her dependents.

Question 30

The means test refers to an easy way to determine whether the debtor has the means to pay pre-petition debts.

Question 31

A voluntary petition amounts to an order for relief.

Question 32

A liquidation bankruptcy is also known as straight bankruptcy.

Question 33

The 2005 Bankruptcy Act made little to no changes with regard to the satisfaction of unsecured claims.

Question 34

The debtor in a Chapter 13 proceeding can keep more property than under a Chapter 7 proceeding.

Question 35

The bankruptcy estate includes all property that the petitioner receives after the petition is filed.

Question 36

A proof of claim is not required to be filed by a secured creditor.

Question 37

An inheritance received by an individual debtor 6 months after filing a Chapter 7 bankruptcy becomes part of the bankruptcy estate.

Question 38

The automatic stay would stop a secured creditor from repossessing any collateral.

Question 39

A party can be petitioned into bankruptcy against that party's will.

Question 40

If Mable makes false representations about her financial position when she obtains an extension of credit,this will bar discharge of her debt to that creditor.

Question 41

A Chapter 11 bankruptcy was designed to provide a method for reorganization of the debtor's affairs.

Question 42

A debtor is not afforded an automatic stay in a Chapter 11 bankruptcy.

Question 43

The automatic stay in a straight bankruptcy proceeding generally does not apply to:

A) actions taken by unsecured creditors
B) actions taken by secured creditors
C) actions to collect alimony or child support
D) actions to repossess collateral
E) C and D only

Question 44

The dischargeable debts under a consumer debt adjustment plan of bankruptcy are the same as those under the straight (liquidation)bankruptcy.

Question 45

Which of the following types of petitions in a Chapter 7 bankruptcy constitute an order for relief?

A) voluntary petitions only
B) all involuntary petitions,but no voluntary petitions
C) voluntary petitions and unchallenged involuntary petitions
D) voluntary petitions and challenged involuntary petitions
E) all voluntary and involuntary petitions

Question 46

What is the general concept of the fresh start in bankruptcy?

A) Debtors are given a new start in paying off their existing debts.
B) Creditors are given a new start in collecting amounts owed to them.
C) Businesses adopt a new plan of business.
D) Debtors have most debts discharged and start over without those debts.

Question 47

Which of the following is not part of the fresh start in bankruptcy?

A) protection for debtors from creditors' abusive actions in collecting past debts
B) preventing certain creditors from gaining unfair advantage over other creditors in the collection process
C) protecting creditors from actions by the debtor that would diminish the value of the bankruptcy estate
D) preserving existing business relations
E) preventing the debtor from incurring excessive debt following the discharge in bankruptcy

Question 48

What is the primary purpose of federal bankruptcy law?

A) to protect creditors
B) to treat all creditors equally
C) to preserve business relationships
D) to discharge the debtor from burdensome debts by giving him a fresh start

Question 49

Which of the following need not appear as part of a voluntary bankruptcy petition?

A) a list of secured creditors
B) a list of unsecured creditors
C) a statement that the petitioner's debts exceed his assets
D) a list of property
E) a statement of the financial affairs of the petitioner

Question 50

Sole proprietorships may file for Chapter 13 bankruptcy.

Question 51

Bankruptcy proceedings are commenced under:

A) state law
B) federal law
C) local (city or county) law
D) state or federal law at the option of the debtor
E) state or federal law at the option of the creditors

Question 52

"Straight bankruptcy" is another term for:

A) discharge
B) liquidation
C) reorganization
D) a consumer debt adjustment

Question 53

Which of the following is true about "proof of claims?"

A) They must be filed by both secured and unsecured creditors in order for the creditor to receive a distribution from the bankruptcy estate.
B) They need not be filed by secured creditors whose security covers the amount of their debt.
C) They are never used by secured creditors.
D) They can generally be filed any time within 1 year of the filing of the bankruptcy petition.

Question 54

A Chapter 12 bankruptcy is a permanent part of the Bankruptcy Code that allows family farmers and family fisherman with regular income to file a type of reorganization bankruptcy.

Question 55

Which of the following is not a duty of the trustee in a bankruptcy case?

A) investigate the debtor's financial affairs
B) employ disinterested professionals such as attorneys and accountants to assist in the administration of the estate
C) provide financial advice to the debtor
D) bring lawsuits on behalf of the bankruptcy estate
E) distribute the proceeds of the bankruptcy estate

Question 56

What is the purpose of the automatic stay in a bankruptcy case?

A) to pay secured creditors without their having to file a proof of claim
B) to ensure that secured creditors are the first to receive payment
C) to prevent a race for the debtor's assets by assuring an orderly distribution in which each party will receive that to which the party is entitled
D) to enable the appointment of a trustee
E) to maximize the assets available for distribution to creditors

Question 57

What are the two most common types of bankruptcy used by businesses?

A) liquidation and termination
B) liquidation and reorganization
C) termination and reaffirmation
D) reaffirmation and liquidation
E) reaffirmation and extension

Question 58

In a bankruptcy,the representative of the bankrupt estate is known as the:

A) supervisor
B) adjutant
C) arbitrator
D) trustee

Question 59

Debtors under a Chapter 11 bankruptcy may not accept executory contracts and unexpired leases.

Question 60

Unsecured creditors must confirm a Chapter 13 plan.

Question 61

Which of the following debts are usually dischargeable in bankruptcy?

A) taxes and customs duties
B) debts not properly listed in the debtor's bankruptcy schedules
C) fines and other penalties owed to a governmental unit
D) debts incurred in the ordinary course of business

Question 62

Which of the following is not true about a Chapter 13 consumer debt adjustment compared to other bankruptcy plans?

A) Executory contracts may be disaffirmed under Chapter 13 but not under other plans.
B) Certain debts are dischargeable under Chapter 13 that are not dischargeable under other plans.
C) More property may be retained under Chapter 13 than under other plans.
D) Chapter 13 allows for an extension of time for payments that other plans do not.
E) Chapter 13 plans are less expensive than other plans.

Question 63

A reaffirmation agreement would most likely be used in which of the following situations?

A) when a bankruptcy petition has alimony debts
B) when the petitioner has a debt secured by an automobile that the debtor would like to keep
C) when the petitioner has made a voidable preference
D) when the petitioner has committed a fraudulent act
E) B and D only

Question 64

If the value of the collateral is less than the debt owed to the secured party,then:

A) the secured party is still secured for the entire debt owed him
B) the secured party is unsecured for the excess of debt over the value of the security
C) the secured party loses the excess of debt over the value of the security
D) the secured party gets to take some other property as collateral so his entire debt is secured
E) the secured party is unsecured for the entire debt

Question 65

What is the most important difference when a business uses Chapter 11 rather than Chapter 7 in a bankruptcy?

A) In Chapter 11,petitions must be voluntary,whereas Chapter 7 petitions can be either voluntary or involuntary.
B) In Chapter 11,the business survives,whereas in Chapter 7 the business does not survive.
C) In Chapter 11,all creditors are assured of receiving some payment,whereas in Chapter 7 some creditors may receive nothing.
D) In Chapter 11,there is never a trustee,whereas in Chapter 7 there is always a trustee.

Question 66

How far back in time can the trustee look to recover a fraudulent transfer?

A) 90 days
B) 1 year
C) 90 days,unless intent can be shown,in which case the period is extended to 2 years
D) 2 years

Question 67

A debtor may receive a discharge in straight bankruptcy only once:

A) in a lifetime
B) every 4 years
C) every 6 years
D) every 8 years
E) Both C and D - it depends on what type of bankruptcy they have filed before.

Question 68

If a business goes into a reorganization bankruptcy and has a contract with its employees to pay certain wages,that business:

A) must honor the employees' contract
B) may reject the employees' contract if certain procedures are followed,and with court approval
C) may automatically reject the employees' contract
D) may automatically reduce those wages by 50 percent
E) may automatically reduce those wages by 25 percent

Question 69

Which of the following is true about the discharge of debts in bankruptcy?

A) Claims that the debtor has not listed on her schedule of debts are not discharged.
B) No tax claims are discharged.
C) All fines and penalties payable to the government are discharged.
D) Debts caused by the debtor's use of poor business judgment are not discharged.
E) All cash advances obtained by the debtor on a revolving line of credit prior to the filing of the bankruptcy petition are discharged.

Question 70

When a class of creditors does not approve of a plan of reorganization under Chapter 11,the court can order the plan into effect:

A) using the equity method
B) using the secured creditor's method
C) using the cram down method
D) only if the plan is modified so that all classes of creditors consent

Question 71

If a debtor is an individual who wants to keep most of his property,has a steady income,and believes he can pay off most of his debts,the best bankruptcy plan for him would probably be:

A) straight bankruptcy
B) a reorganization
C) a consumer debt adjustment
D) a reaffirmation plan
E) a Chapter 12 plan

Question 72

A fraudulent transfer includes:

A) any payment made to a creditor after the petition is filed
B) any payment made within 90 days before the petition is filed
C) any payment made within two years before the petition is filed,for a preexisting debt,if the creditor receives more than he would under the bankruptcy laws
D) any payment made within 90 days before the petition is filed,for a preexisting debt

Question 73

A debtor may promise to pay a debt discharged in bankruptcy by executing:

A) an extension agreement
B) a reaffirmation agreement
C) a writ of confirmation
D) a debt consolidation agreement

Question 74

Which of the following is not a proper federal exemption under the bankruptcy laws?

A) homestead allowance up to a certain amount
B) exemption for a car up to a certain amount
C) unlimited exemption for professionally prescribed health aids,such as an artificial limb
D) unlimited exemption for tools used in the petitioner's trade or business

Question 75

What is an exemption under the bankruptcy laws?

A) a debt that does not need to be paid
B) a debt that is not forgiven
C) an asset that is not required to be used toward satisfaction of debts
D) an administrative expense that does not need to be paid
E) a law with which one need not comply

Question 76

Which two states were cited in the textbook as having homestead exemptions without an upper dollar limit?

A) Texas and Alaska
B) Texas and California
C) California and Florida
D) New York and California
E) Texas and Florida

Question 77

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 and three largest unsecured creditors

Question 78

If you are a creditor,your best protection in the event of the debtor's bankruptcy (including protection from the debtor's other creditors)is usually obtained if you had previously received:

A) the debtor's agreement to pay you first
B) a written promise from the debtor to pay the debt as agreed
C) a security interest granted by the debtor
D) audited financial statements of the debtor

Question 79

Chapter 13 of the bankruptcy law gives individuals who have a steady source of income the opportunity to:

A) adjust the debts if they have a regular income
B) avoid all legal obligations for 1 year
C) cancel all obligations due and owing up to $100,000
D) elect a corporate dissolution

Question 80

Which of the following is true about exemptions for an individual in a Chapter 7 bankruptcy?

A) The federal statutory exemptions apply in all cases.
B) Exemptions are always determined by state law.
C) The federal law allows states to set their own exemptions,which can be either mandatory or optional,in place of the federal exemptions.
D) The state exemptions,where present,generally allow the debtor to keep fewer assets than under federal law.