Deck 34: Bankruptcy

Question 1

All bankruptcy proceedings are conducted in federal bankruptcy courts.

Answer 1

True

Question 2

In a Chapter 7 proceeding, the debtor's creditors take control of the debtor's property.

Answer 2

False

Question 3

One of the Bankruptcy Code's main goals is to ensure preferential treatment of certain creditors who are competing for a debtor's assets.

Answer 3

False

Question 4

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11, but not Chapter 13, bankruptcies.

Question 5

In a Chapter 7 proceeding, secured creditors' claims have priority over the claims of unsecured creditors.

Question 6

Under Chapter 7, at a meeting of creditors, one of the creditors is elected to take over the debtor's assets.

Question 7

An individual debtor is not entitled to exempt any property from a Chapter 7 proceeding.

Question 8

In a Chapter 7 proceeding, the bankruptcy trustee distributes the bankruptcy estate to creditors with proofs of claim.

Question 9

In a Chapter 13 bankruptcy, debtors retain most of their assets and agree to payments on their debts, most of which are discharged within three years.

Question 10

T he bankruptcy trustee in a Chapter 7 proceeding is accountable for administering the debtor's estate.

Question 11

Once a petition is properly filed, creditors can commence or continue most legal actions against the debtor to recover claims.

Question 12

To qualify under Chapter 7, a debtor must complete a means test to determine whether the debtor has been living within his or her means.

Question 13

Bankruptcy relief is provided under state law.

Question 14

In Chapter 11 proceedings, a debtor is allowed to continue in business.

Question 15

Debtors may be forced into involuntary bankruptcy by creditors even though their assets far exceed their liabilities.

Question 16

Debts that remain after a Chapter 7 liquidation are not discharged, and the debtor retains his or her obligation to pay them.

Question 17

A debtor who makes false statements under oath may be denied a discharge of his or her debts in the bankruptcy proceeding.

Question 18

A debtor cannot challenge an involuntary bankruptcy petition.

Question 19

Businesses must be insolvent to file for bankruptcy relief.

Question 20

Chapter 7 bankruptcy is reserved for any natural person.

Question 21

With respect to debtors, the main goal of bankruptcy law is to

A) encourage the continued use of credit .
B) ensure that third parties will continue to guarantee loans.
C) provide a new start without creditors' claims .
D) shield assets from creditors' claims.

Question 22

Under Chapter 13, all debts are dischargeable.

Question 23

Chapter 7 of the Bankruptcy Code provides for

A) the adjustment of debts of individuals-not businesses .
B) liquidation proceedings.
C) the reorganization of the obligations of the debtor .
D) the adjustment of debts of businesses-not individuals .

Question 24

In a Chapter 7 proceeding, all debts that cannot be paid by the bankruptcy estate will be discharged by the court.

Question 25

In a Chapter 7 proceeding, the primary effect of a discharge is to set aside any prior judgment on a discharged debt and to prohibit any action to collect it.

Question 26

If all classes of creditors accept the debtor's Chapter 11 plan, the court cannot refuse to confirm it.

Question 27

In a Chapter 11 proceeding, for an individual debtor, the court may order discharge at any time after the plan is confirmed.

Question 28

All bankruptcy proceedings are held in

A) federal bankruptcy courts .
B) state bankruptcy courts.
C) special cross-jurisdictional debtors courts .
D) local small-claims courts.

Question 29

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Question 30

In a Chapter 13 proceeding, the debtor retains possession of his or her assets.

Question 31

Only the debtor may file a plan under Chapter 13.

Question 32

A Chapter 13 proceeding is more expensive and complicated than a Chapter 11 or Chapter 7 proceeding.

Question 33

Under Chapter 13, a plan may provide for the payment of an amount less than 100 percent of the debtor's total obligations.

Question 34

In a Chapter 7 proceeding if there is not enough money to pay all the creditors, it is given back to the debtor.

Question 35

In a Chapter 11 proceeding, a debtor corporation and its creditors agree on a plan under which the corporation pays a portion of its debt.

Question 36

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

Question 37

With respect to creditors, the main goal of bankruptcy law is to

A) ensure that creditors will continue to lend to insolvent debtors.
B) ensure that the debtor suffers for poor financial choices .
C) ensure equitable treatment in the competition for debtor assets.
D) make all debtor property available for all creditor claims.

Question 38

Under Chapter 13, a plan must provide for the payment of all of the debtor's obligations in full.

Question 39

A Chapter 13 proceeding can be initiated by creditors forcing a debtor into an involuntary bankruptcy.

Question 40

Under any chapter of the Bankruptcy Code, failing to file the necessary documents with the debtor's petition for relief can result in

A) an automatic stay .
B) the discharge of the debtor's obligations.
C) the dismissal of the petition .
D) the distribution of the debtor's assets to his or her creditors.

Question 41

Gina's creditors attempt to force her into bankruptcy proceedings. The creditors will be unsuccessful if Gina

A) owns a business with ten or more employees .
B) is a farmer.
C) is also a creditor .
D) refuses to comply.

Question 42

Dana operates Energy Inc., a corporation in the fuel-supply business. Dana wants to create a plan under which the firm pays a portion of its debts, is discharged of the remainder, and is allowed to continue in business. Energy should file a petition in bankruptcy for relief through

A) a liquidation.
B) a reorganization.
C) a repayment plan.
D) an adjustment of debts.

Question 43

A bankruptcy trustee is accountable for

A) administering the debtor's estate.
B) exempting certain property from the bankruptcy.
C) operating a debtor's business to obtain maximum profit for the creditors.
D) commencing actions against the debtor to recover creditors' claims.

Question 44

An involuntary bankruptcy occurs when a debtor

A) files forms designated for the purpose.
B) is unable to pay his or her debts as they come due.
C) is forced into bankruptcy proceedings by his or her creditors.
D) has debts that exceed the fair market value of his or her assets.

Question 45

Under Chapter 7 and Chapter 11

A) a repayment plan is developed by the debtor .
B) petitions can be filed voluntarily or involuntarily.
C) the entry of the order for relief is based on different criteria .
D) applies trustee oversees all of the debtor's assets .

Question 46

Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for

A) debts related to motor vehicles, household goods, and trade tools .
B) domestic support.
C) the debtor's equity in his or her residence .
D) student loans.

Question 47

A bankruptcy trustee must determine whether the debtor's financial situation warrants relief based on a comparison of the debtor's income with

A) the profit of the debtor's creditors.
B) the income of other families in the same state.
C) the wealth available to the debtor's peers.
D) the debtor's expenses.

Question 48

A voluntary petition in bankruptcy must include

A) proof of each creditor's claim.
B) a list of creditors and the amount of the debt owed to each.
C) a future plan for increasing the debtor's income.
D) a statement indicating that the debtor understands basic economics.

Question 49

Ava files a petition in bankruptcy under Chapter 7. Brian takes control over her property and reduces it to money for distribution. Brian most likely is

A) a secured creditor .
B) a bankruptcy court judge.
C) a bankruptcy trustee .
D) a debtor who filed jointly for bankruptcy under a single petition.

Question 50

Under Chapter 7, once the proceeds of the bankruptcy estate have been distributed, all or most of the debtor's remaining debts

A) are discharged .
B) paid by the court.
C) renewed without legal action as obligations of the debtor .
D) subject to legal actions to recover any unpaid amounts.

Question 51

Under Chapter 11, soon after the entry of the order for relief

A) any business debtor can choose to avoid creditors' committees.
B) the debtor's creditors file a plan to distribute the debtor's assets.
C) a creditors' committee of unsecured creditors is appointed.
D) the debtor's assets are liquidated to pay tax claims.

Question 52

Under Chapter 7, once the proceeds have been distributed, the obligations of the debtor most likely to remain and not be discharged include

A) taxes accruing within the last three years.
B) credit card debt accrued in the last three years.
C) medical bills from items in the past five years.
D) debt on a vehicle.

Question 53

In addition to financial statements, each voluntary petition in bankruptcy must include

A) a plan outlining how debt payments will be made.
B) a certificate proving the receipt of credit counseling.
C) a creditors' agreement allowing the debtor to continue in business.
D) a statement of preference for one creditor over another.

Question 54

To force a debtor with twelve or more creditors into bankruptcy proceedings, at least three of those who join in the petition must have unsecured claims that add up to at least

A) $153.
B) $1,532.
C) $15,325 .
D) $153,250.

Question 55

Chapter 11 bankruptcy is available to

A) any debtor who is eligible under Chapter 7, and railroads.
B) an individual, not a partnership or a corporation, with regular income and debts of less than a certain amount.
C) any "person" except railroads and certain financial institutions.
D) any party who is not eligible under a different chapter of the Code.

Question 56

Under Chapter 7, the primary effect of a discharge is to

A) extend the time for the debtor's payment of overdue debts.
B) allow a creditor to collect a previous judgment on a discharged debt.
C) force a creditor to obtain a new judgment on a discharged debt.
D) void a judgment on a discharged debt and prohibit an action to collect it.

Question 57

Under Chapter 7, a debtor who fails to appear at the creditors' meeting when required may be

A) denied a discharge of his or debts in the bankruptcy proceeding.
B) ordered to complete a means test.
C) forced to submit to an examination by the creditors.
D) told to turn over control of his or her property to a bankruptcy trustee.

Question 58

If a voluntary petition in bankruptcy is found to be proper, the court's entry of an order for relief

A) stops the debtor's payment of debts in the petition.
B) discharges the debtor's obligations for any debt over $10,000.
C) dismisses the petition .
D) distributes the debtor's assets to his or her creditors.

Question 59

Under Chapter 7, to be entitled to receive a portion of a debtor's estate, each creditor must file a proof of claim with the bankruptcy court within ninety days of

A) the order for relief.
B) the petition.
C) the automatic stay.
D) the creditors' meeting.

Question 60

Under Chapter 7, a discharge is most likely to be denied if the debtor

A) conceals property to hinder or delay a creditor .
B) is insolvent.
C) continues to have debts after the distribution of the estate .
D) hires an attorney to assist in the bankruptcy process.

Question 61

Shippers Dispatch Corporation orders office equipment from Office Outfitters, Inc. on credit. Shippers Dispatch takes out a loan from Capital Credit, Inc., subject to a security interest in Shippers Dispatch's building and equipment. Shippers Dispatch owes several other creditors for the purchase or supplies and raw materials. With debts of $1.1 million, Shippers Dispatch files a bankruptcy petition under Chapter 11. Discuss the Chapter 11 process and what role each of the creditors will play in that process.

Question 62

Under Chapter 11, a plan to conserve and administer the debtor's assets must be submitted for acceptance and confirmation to

A) the creditors only.
B) the court only.
C) the creditors and the court.
D) the debtor only.

Question 63

Under Chapter 13, after the completion of all payments under the plan, the court will grant a discharge of

A) only the debts provided for by the plan.
B) only the obligations not provided for by the plan.
C) all claims, whether or not provided for by the plan.
D) all obligations that remain unsatisfied.

Question 64

Compared to Chapter 7 and 11 plans, a Chapter 13 plan

A) permits creditors to force a debtor into involuntary bankruptcy.
B) allows a debtor to retain possession of his or her assets.
C) is more expensive and more complicated.
D) permits any interested party to file a repayment plan.

Question 65

Building Construction Inc. wants to agree with its creditors on a plan under which it pays a portion of its debt and is discharged of the rest. To accomplish this goal, the corporation should file a petition in bankruptcy under Chapter 11 for relief through

A) a liquidation.
B) a reorganization.
C) a repayment plan.
D) an adjustment plan.

Question 66

At the time of the filing of the petition and the time of the filing of the plan, Chapter 13 imposes on the debtor the requirement of

A) goodwill.
B) good faith.
C) bad faith.
D) intent.

Question 67

Under Chapter 13, a repayment plan must provide for

A) the turnover of the debtor's future income to the creditors.
B) full payment of all claims, without exception.
C) the same treatment of each claim within a particular class of claim.
D) a vote of unsecured creditors.

Question 68

Under Chapter 11, a reorganization plan must

A) not separate creditors into different groups.
B) specify the treatment to be afforded to the debtor by the creditors.
C) provide an adequate means for the plan's execution.
D) demonstrate insolvency of the debtor.

Question 69

Eligible for relief on a petition in bankruptcy under Chapter 13 is

A) any debtor who is eligible under Chapter 7, and railroads.
B) an individual, not a partnership or a corporation, with regular income and debts of less than a certain amount.
C) any "person" except railroads and certain financial institutions.
D) any party who is not eligible under a different chapter of the Code.

Question 70

Baby Day Care, a sole proprietorship, has $150,000 in debt and wants to pay as many of its obligations as reasonably possible. It wishes to be discharged of any remaining debt it cannot pay. To accomplish this goal, the proprietorship should file a petition in bankruptcy under Chapter 13 for relief through

A) a liquidation.
B) a reorganization.
C) a repayment plan.
D) an automatic stay.

Question 71

eGear is a retail seller of consumer electronic equipment. eGear sells Fiona a $2,400 television set on credit. Fiona pays $100 down and agrees to pay the balance in equal installments. eGear retains a security interest in the set. Two months later, Fiona defaults on the payments to eGear and is involuntarily petitioned into bankruptcy by other creditors. Discuss eGear's right to repossess the TV set or to be paid on the debt.

Question 72

Under Chapter 11, a business debtor's obligations most likely to remain and not be discharged include

A) taxes accruing within the last three years.
B) debt accrued in the last three years for supplies.
C) debt owed for a conference the business held.
D) debt on a fleet of vehicles.