Deck 26: Bankruptcy

Question 1

The goal of a Chapter 7 bankruptcy is to offer a debtor a fresh start.

Answer 1

True

Question 2

Toni is in great debt and therefore files for a Chapter 7 bankruptcy and seeks to liquidate assets and discharge her debt. Which of the following is the first step in this process?

A) Appoint a bankruptcy trustee.
B) Toni must pay off her assets.
C) Toni must file a notice with her creditors.
D) The court must itemize the assets.

Answer 2

Appoint a bankruptcy trustee.

Question 3

The assets of the debtor available in a bankruptcy proceeding is called a(n)

A) Discharge property
B) Bankruptcy estate
C) Perfected estate
D) Lien estate

Answer 3

Bankruptcy estate

Question 4

Two weeks before Edna files for bankruptcy she pays a friend $25,000, the full amount of money she owes her. After paying her friend, Edna has only $100 in assets but still owes $50,000 in other debt. What will the court likely do?

A) Divide the $100 among the remaining creditors.
B) Take half of the money Edna paid her friend and put it in the bankruptcy estate.
C) The trustee will void the transfer.
D) The court will put a stay so that no other assets can be liquidated.

Question 5

Terri gives her son a birthday gift of $20,000, the entire contents of her savings account. The next day, Terri files for bankruptcy. What, if anything, may happen to the gift to her son?

A) Nothing. Gifts can never be undone.
B) The court may reduce the amount of the gift to cover half of the debts owed.
C) Terri would go to jail.
D) The transfer would be undone if it is proven that Terri's intent was to defraud creditors.

Question 6

Wilma lives in Illinois where the average income is $42,500. Her annual income is $43,000. Will she be able to file for chapter 7 bankruptcy?

A) Yes.
B) No.
C) Yes, if the court determines justice and fair play dictate it.
D) No if the court determines the creditors will be unfairly harmed.

Question 7

Which of the following statement below is incorrect about a Chapter 7 involuntary bankruptcy petition?

A) It is filed against a debtor by three or more creditors.
B) The creditors' claim against the debtor must be at least $15,775.
C) This process is relatively rare.
D) Courts employ this only against businesses.

Question 8

In the case, Kelley v. Cypress Financial Trading Co., the court ruled that the twin pillars of bankruptcy are

A) To protect the debtors and to be efficient.
B) The discharge of the debtor and to satisfy the valid claims.
C) To protect the judicial system and to keep a business in good standing.
D) To be efficient and to be fair to all parties involved.

Question 9

All of the following statements about Chapter 11 bankruptcy are true except

A) It offers a permanent liquidation of assets.
B) It temporarily protects corporations from creditors.
C) It allows businesses to continue business operations.
D) It recognizes that it is better to revive a business than terminate it.

Question 10

A chapter 11 bankruptcy process in which the debtor generally remains in control of assets and business operations in an attempt to rehabilitate the business entity is called

A) Bankruptcy estate administrator
B) Creditor in possession
C) Debtor in possession
D) Fiduciary estate administrator

Question 11

The main power of a strong arm clause, authorized under the Bankruptcy Code, that assists the debtor in possession significantly is

A) The ability to streamline the bankruptcy process.
B) The ability to involuntarily force unwilling creditors to participate in the process.
C) The protection of assets subject to immediate liquidation by the judicial system.
D) The ability to avoid any obligation or transfer of property that the debtor would otherwise be obligated to perform.

Question 12

Realizing that Dante Corporation is insolvent, the debtor in possession files for Chapter 11. As part of the process, the debtor in possession submits a proposal which restructures the board, the leadership roles and the use of existing assets to repay creditors and also reinvest money into the company to spur economic growth. This plan is called

A) A revitalization plan.
B) A reorganization plan.
C) A restructuring plan.
D) A rehabilitation plan.

Question 13

The debtor in possession for the failing Lipnisky Corporation submits a reorganization plan. One of the creditors refuses to accept the plan. What options might the Lipnisky Corporation have at this point?

A) Only to file for Chapter 7 bankruptcy.
B) To request a cram-down provision.
C) To file criminal charges against the creditor.
D) To exclude the creditor from the process.

Question 14

Travis has overextended himself with his mortgage payments, credit card debt and car payments that his current salary can no longer support. He has a steady income but it is no longer enough. Which type of bankruptcy would you suggest that would that would allow him to catch up?

A) Chapter 7
B) Chapter 11
C) Chapter 13
D) Chapter 15

Question 15

In the case Sauer v. Lawson, the court ruled

A) Fraud may be inferred by actual conduct rather than a need to have specific intent.
B) Actual fraud can only be proven if malice aforethought is shown in the transactions.
C) Fraud may be inferred by actual conduct rather and need to have a specific intent.
D) Actual fraud includes conduct that is intended to hinder creditors.

Question 16

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

A) It established a baseline income for Chapter 7 discharge of debt versus being required to repay debts under Chapter 13.
B) It allowed creditors greater option for pursuing unsecured debt.
C) It streamlined the bankruptcy process and made it easier.
D) It allowed the average person to file their own bankruptcy without the need for legal representation.

Question 17

Bill graduated from school with a substantial amount of student loan debt. Instead of getting a job he decides to spend his time skiing in Colorado and attempts to file for Chapter 7 bankruptcy to have a fresh start with no student loans once the skiing season ends. Which statement below is correct about Bill's plan?

A) All of his student loan debt will be erased.
B) Half of his student loan debt will be erased.
C) Under no circumstances will his student loan debt be erased.
D) His student loan debt will be erased only if he can prove undue hardship.