Deck 21: Bankruptcy Law

Question 1

A trustee has the power to avoid preferences.

Answer 1

True

Question 2

A preference occurs when a debtor transfers property or money favoring one creditor over others.

Answer 2

True

Question 3

The basic duty of a trustee is to collect the debtor's property and reduce it to money for distribution.

Answer 3

True

Question 4

One goal of bankruptcy law is to ensure equitable treatment of creditors who are competing for a debtor's assets.

Question 5

The clerk of a bankruptcy court must provide consumer-debtors with information on the types of services available from credit counseling agencies.

Question 6

Bankruptcy proceedings are held in state courts.

Question 7

A farmer cannot be forced into involuntary bankruptcy.

Question 8

Any "person"-defined as including corporations-may be a debtor in a liquidation proceeding.

Question 9

Rulings from bankruptcy courts are final-they cannot be appealed.

Question 10

All debts are dischargeable in bankruptcy.

Question 11

A bankruptcy estate consists of all the debtor's interests in property currently held, wherever located.

Question 12

The filing of a petition for bankruptcy will automatically stay most legal actions against the debtor.

Question 13

Before filing for bankruptcy, a consumer-debtor must receive credit counseling.

Question 14

To supply false information on official bankruptcy schedules is a crime.

Question 15

In the majority of states, debtors may use only federal, not state, exemptions to exempt certain property from the bankruptcy.

Question 16

An order for relief in a bankruptcy proceeding amounts to a discharge of the debts of the party petitioning for bankruptcy protection.

Question 17

If a debtor's income is below the median income, there is no presumption of bankruptcy abuse.

Question 18

A trustee has the power to avoid a sale of the debtor's property.

Question 19

A debtor must be insolvent to file for bankruptcy relief.

Question 20

An involuntary bankruptcy occurs when a debtor's creditors are forced to accept a discharge of the debtor's debts.

Question 21

Once a discharge is granted, it may not be revoked, even if, for example, a debtor concealed property to defraud a creditor.

Question 22

Certain debtors may not qualify to have all debts discharged in bankruptcy.

Question 23

Ed files a petition in bankruptcy. The initial proceeding on this petition will be in​

A) ​a federal bankruptcy court.
B) ​a state bankruptcy court.
C) ​the highest court in the state in which the debtor is located.
D) ​the United States Supreme Court.

Question 24

Unsecured creditors do not have a vote to confirm aChapter 13 plan.

Question 25

Payments under aChapter 13 plan must be completed within three to five years, depending on the debtor's family income.

Question 26

Bess wishes to appeal a decision of a bankruptcy court. Bess may appeal to​

A) ​no court-there is no appeal from a bankruptcy court decision.
B) ​a federal district court.
C) ​the U.S. Supreme Court.
D) ​a state intermediate appellate court.

Question 27

If the circumstances indicate bad faith, a court can dismiss a debtors'Chapter 13 petition.

Question 28

In a repayment plan case, the plan must provide for payment of all claims in full, whether or not they are entitled to priority.

Question 29

A bankruptcy court may deny a discharge based on a debtor's conduct.

Question 30

For individual debtors, the plan in a reorganization case must be completed before a discharge will be granted.

Question 31

A student loan is discharged underChapter 13 unless the creditor can show "undue hardship."

Question 32

A repayment plan case can be initiated by the conversion of a liquidation petition.

Question 33

In the distribution of the debtor's estate, unsecured creditors take priority over secured creditors.

Question 34

Some student loans are dischargeable in aChapter 7 bankruptcy.

Question 35

CreditLine Inc. joins with other creditors to force Deli Sandwich Shop, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to​

A) ​ensure that creditors will continue to lend to insolvent debtors.
B) ​protect creditor assets from diminution in value.
C) ​provide equitable treatment in the competition for debtor assets.
D) ​make all debtor property available for creditor claims.

Question 36

Carly files a petition in bankruptcy. One of the goals of bankruptcy law with respect to a debtor is to​

A) ​encourage the continued use of credit to borrow funds.
B) ​ensure that third parties will continue to guarantee loans.
C) ​provide a fresh start, free from creditors' claims.
D) ​shield assets from creditors' claims.

Question 37

The same principles that govern the filing of a liquidation petition apply to reorganization proceedings.

Question 38

If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors, the debtor is liable for the difference.

Question 39

Lindsay operates a sole proprietorship, a corporation, and a partnership. She wants to obtain relief for her individual debts and the debts of her corporation and partnership. For each of these, she may file a petition in bankruptcy for relief through​

A) ​a liquidation.
B) ​a reorganization.
C) ​a repayment plan.
D) ​any of the choices.

Question 40

On the entry of an order for relief in a reorganization case, the creditors generally take over the operation of the debtor's business.

Question 41

Ken files a petition for bankruptcy. Ken must include with the petition​

A) ​a plan to turn over his future income to the trustee.
B) ​a certificate proving attendance at a credit-counseling briefing.
C) ​a provision of adequate means for the petition's execution.
D) ​a statement of preference for one creditor over another.

Question 42

Harold files a bankruptcy petition. The resulting automatic stay will apply to Harold's payments for​

A) ​alimony.
B) ​child support.
C) ​none of the choices.
D) ​a car.

Question 43

Troy files a petition for bankruptcy. Troy must include with the petition​

A) ​proof of each creditor's claim.
B) ​a list of creditors and the amount of the debt owed to each.
C) ​all of his debit and credit cards to be disposed of by the court.
D) ​an affidavit testifying to his having studied the Bankruptcy Code.

Question 44

Nora files a petition in bankruptcy. She turns her assets over to O'Brien, who sells them and then distributes the proceeds to Nora's creditors. O'Brien is​

A) ​a preferred creditor.
B) ​a bankruptcy court judge.
C) ​a bankruptcy trustee.
D) ​a DIP (debtor in possession).

Question 45

Jo files a voluntary petition for bankruptcy underChapter 7. The court will likely deny a discharge of her debts if she​

A) ​conceals records of her financial condition to defraud a creditor.
B) ​does not have sufficient assets to pay all her secured creditors.
C) ​filed for bankruptcy 12 years ago.
D) ​has a criminal record.

Question 46

Roland files a petition in bankruptcy. After all his assets have been sold and the proceeds distributed among his creditors, Roland's remaining debts​

A) ​are discharged.
B) ​paid by the court.
C) ​must be paid by Roland.
D) ​are put on hold until Roland has sufficient means to pay them.

Question 47

Creditors hold judgments on overdue debts against Expert Auto Repair when the debtor receives a discharge in bankruptcy. The discharge will​

A) ​extend the time for payment of the overdue debts.
B) ​have no effect on the creditors' judgments.
C) ​require creditors to re-file their collection actions.
D) ​void any creditor's judgment on a discharged debt.

Question 48

Matt files a petition for a discharge in bankruptcy. His failure to appear at a meeting of the creditors listed in his schedules may result in him being​

A) ​denied a discharge of bankruptcy.
B) ​fined.
C) ​held in contempt.
D) ​imprisoned.

Question 49

Cassie files a voluntary petition in bankruptcy for relief through a liquidation proceeding. Among her debts that will not be discharged are claims​

A) ​by creditors who were not notified of the bankruptcy.
B) ​for money to be paid for goods not delivered.
C) ​for contributions to employee benefit plans.
D) ​for long overdue credit-card debt.

Question 50

Milos files a petition in bankruptcy. His dischargeable debts include​

A) domestic-support obligations.
B) ​student loans unless the lender would suffer undue hardship.
C) ​court costs, trustee fees, and attorney's fees associated with the bankruptcy.
D) ​unsecured credit-card debt.

Question 51

Renee's voluntary petition for bankruptcy is found to be proper. The order for relief is effective as soon as​

A) ​she files the petition.
B) ​she posts a bond to cover the costs of the proceedings.
C) ​her creditors agree to the terms.
D) ​the trustee collects and distributes the property of her estate.

Question 52

Larry has fifteen creditors. To force Larry into bankruptcy proceedings, at least three creditors must join the petition and their unsecured claims must add up to at least​

A) ​$500.
B) ​$15,325.
C) ​$100,000.
D) ​$500,000.

Question 53

Thirty-one days before filing a petition in bankruptcy, Gavin transfers property and makes payments that favor one creditor over another. These are​

A) ​affirmation agreements.
B) ​preferences.
C) ​secured interests.
D) ​unsecured debts.

Question 54

Daniel is a trustee for a federal bankruptcy court. Daniel's duties include​

A) ​collecting the debtor's available estate.
B) ​establishing priority for the payment of unsecured creditors.
C) ​operating a debtor's business to obtain maximum profit for creditors.
D) ​submitting to an examination under oath by the creditors.

Question 55

Leo files a petition in bankruptcy. Among his debts are unpaid taxes, fines owed to the government, student loans owed to Metro University, and support owed to his ex-wife Nadia. Most likely to be discharged are​

A) back taxes accrued within the previous three years.
B) ​fines outstanding less than eight years.
C) ​student loans whose payment would impose undue hardship.
D) ​spousal-support debts unpaid for more than eighteen months.

Question 56

Lynn, the owner of Market Sales Company, sells the firm to Nell for a note payable to Lynn for $100,000. Nell does not pay the note and files for bankruptcy underChapter 7. The debt represented by the note is​

A) ​dischargeable if $100,000 was a high price for the firm.
B) ​dischargeable under any circumstances.
C) not dischargeable if Nell concealed assets to defraud Lynn.
D) ​not dischargeable under any circumstances.

Question 57

Rob's creditors try to force him into involuntary bankruptcy. The creditors will be unsuccessful if Rob​

A) ​owns a business that employs fewer than ten people.
B) ​is a farmer.
C) ​has a medical condition.
D) ​has to pay child support.

Question 58

Donna goes through an involuntary bankruptcy proceeding. An involuntary bankruptcy occurs when​

A) ​a debtor files forms designated for the purpose in a bankruptcy court.
B) ​a debtor is unable to pay his or her debts as they come due.
C) ​a debtor's creditors force the debtor into bankruptcy proceedings.
D) ​a debtor's debts exceed the fair market value of his or her assets.

Question 59

Teri files a petition for bankruptcy. Her creditors must file with the court their proof of claims against her assets within​

A) ​fifteen days of the order for relief.
B) ​thirty days of the filing of the petition.
C) ​sixty days of the automatic stay.
D) ​ninety days of the creditors' meeting.

Question 60

Patty files a petition in bankruptcy. At the moment of filing​

A) ​an automatic stay goes into effect.
B) ​Patsy's debts are discharged.
C) ​Patsy's petition is dismissed.
D) ​Patsy's property is distributed to her creditors.

Question 61

Builders Construction files a voluntary petition for bankruptcy. In listing its assets, Builders intentionally omits certain assets, including plots of undeveloped real estate. After Builders is granted a discharge, Commercial Electric, one of Builders' unsecured creditors whose claims were discharged, learns of the fraud. Commercial Electric can​

A) ​do nothing.
B) ​enforce its claim against Builders.
C) ​file an involuntary petition for bankruptcy against Builders.
D) ​take possession of the stones with or without a breach of the peace.

Question 62

Jordan believes that she needs to obtain a discharge in bankruptcy through an individual's repayment plan. This proceeding can be initiated by a filing of a petition by​

A) a trustee.
B) ​a debtor.
C) ​a corporation.
D) ​a partnership.

Question 63

To adjust debt and institute a repayment plan, Diana-who is not a corporation, a partnership, or a family farmer or fisherman-may file a petition in bankruptcy for relief through​

A) ​a liquidation.
B) ​a reorganization.
C) ​a repayment plan.
D) ​a straight bankruptcy plan.

Question 64

Spicy Pizza, Inc., files for bankruptcy underChapter 11. Spicy's reorganization plan must contain​

A) ​a plan to turn over its future income to the trustee.
B) ​a certificate proving attendance at a credit-counseling briefing.
C) ​a provision of adequate means for the plan's execution.
D) ​a statement of preference for one creditor over another.

Question 65

Farrah buys a car from Go Motors, financing the purchase through a loan. Less than a year later, she files for bankruptcy underChapter 13. Her plan must provide that Go has a lien on the car until the entire debt is paid​

A) ​under no circumstances.
B) ​if Go extended credit for all or part of the purchase price of the car.
C) ​if any of the loan for the car remains unpaid, regardless of the creditor.
D) ​if her other creditors do not object.

Question 66

Jill believes that she should file a plan for aChapter 13 discharge in bankruptcy. A court will confirm her bankruptcy plan if it provides for

A) ​the completion of all payments to all creditors within six years.
B) ​the payment of 100 percent of all obligations in full.
C) ​the surrender of all collateral to the creditors.
D) ​the turnover of the debtor's future income to the trustee.

Question 67

To adjust debt and institute a repayment plan, Don, a family fisherman in the Gulf of Mexico, may file a petition in bankruptcy for relief under the Bankruptcy Code'sChapter​

A) ​7.
B) ​11.
C) ​12.
D) ​13.

Question 68

eGear is a retail seller of cellphones, televisions, and other consumer electronic equipment. eGear sells Fiona a $2,400 large-screen, high-definition set on a retail installment security agreement in which she pays $100 down and agrees to pay the balance in equal installments. eGear retains a security interest in the set, and perfects that interest by filing a financing statement centrally. Two months later, Fiona is in default on the payments to eGear and is involuntarily petitioned into bankruptcy by other creditors. Discuss eGear's right to repossess the TV set and whether eGear has priority over the trustee in bankruptcy to any proceeds from the disposal of the set.

Question 69

Wild River Tours Corporation wants to formulate a plan under which it pays a portion of its debts and is discharged of the remainder while continuing in business. To accomplish this goal, Wild River should file a petition in bankruptcy for relief through​

A) ​a liquidation.
B) ​a reorganization.
C) ​a repayment plan.
D) ​a straight bankruptcy plan.

Question 70

Zeke files a petition for bankruptcy underChapter 13. Zeke'sChapter 13 plan must provide for​

A) ​the turnover of his future income to the trustee.
B) ​his attendance at a credit-counseling briefing.
C) ​adequate means for the petition's execution.
D) ​a preference for one creditor over another.

Question 71

Ozzie files a petition in bankruptcy for relief through an individual's repayment plan. He is granted a discharge. Debts that will not be discharged include claims for​

A) ​all debts provided for by the plan.
B) ​money owed for services rendered.
C) ​allowed claims not provided for by the plan.
D) ​credit-card debt.

Question 72

Sunn Energy, Inc., needs funds to meet its payroll, to make other current operating expenses, and to pay its creditors. Terence, Sunn's only shareholder, loans the company $100,000 and accepts a promissory note signed on behalf of Sunn by Ulrich, the firm's accountant. Sunn's financial problems continue, however, and the firm's creditors file an involuntary petition to force it into bankruptcy. Is Terence entitled to repayment of the loan to Sunn? If so, what is the priority of the claim?