Deck 15: Creditor-Debtor Relations and Bankruptcy

Question 1

An individual debtor is allowed to exempt certain property from the bankruptcy.

Answer 1

True

Question 2

Each state permits a debtor to retain the family home,in its entirety or in part,free from the claims of unsecured creditors.

Answer 2

True

Question 3

A debtor wishing to file for bankruptcy must complete the means test to determine whether he or she qualifies.

Answer 3

True

Question 4

A creditor can garnish almost all types of property.

Question 5

In a repayment plan case,after the debtor has completed all payments,the court grants a discharge of all debts provided for by the plan.

Question 6

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

Question 7

A writ of execution is a court order to execute a debtor after the entry of a final judgment in a creditor's lawsuit against the debtor.

Question 8

The holder of an artisan's lien can foreclose and sell the property subject to the lien to satisfy the debt.

Question 9

The content of a family-fisherman bankruptcy plan is basically the same as that of a repayment plan.

Question 10

A reorganization plan is a plan to conserve and administer the debtor's assets in the hope that all of the creditors will eventually be paid in full.

Question 11

Under federal law,an employer can dismiss an employee because his or her wages are being garnished.

Question 12

A creditor's composition agreement is usually held to be unenforceable.

Question 13

Making any material modification in the terms of a debtor's contract,without the consent of the surety,will not discharge the surety's obligation.

Question 14

An involuntary bankruptcy occurs when the debtor's credit does not cover all of his or her debts.

Question 15

Subrogation refers to the right of a co-surety to recover from the other co-sureties the amount paid above his or her proportionate share of a debt.

Question 16

Personal property that is most often exempt from satisfaction of judgment debts does not include livestock.

Question 17

Payment of the principal obligation will not discharge the guarantor from the obligation.

Question 18

Certain debts are not dischargeable in bankruptcy.

Question 19

A debtor does not need to be insolvent to file for bankruptcy relief.

Question 20

Certain reorganization cases may be converted to repayment plan cases with the consent of the debtor.

Question 21

Seth files a petition for bankruptcy.Seth 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 read the Bankruptcy Code.

Question 22

Petulia is a debtor.Her employer Quantum Investments,Inc. ,her alma mater State University,and TimePay Credit Company are her creditors.For these parties,a petition in bankruptcy for relief through an individual's repayment plan could be filed on Petulia's behalf by Petulia and

A)none of the other parties.
B)her employer or her creditors.
C)her creditors only.
D)her employer only.

Question 23

Mac files a petition for a discharge in bankruptcy.Mac's failure to appear at a meeting of the creditors listed in Mac's schedules may result in Mac being

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

Question 24

Mike owes $12,000 to Nora,$6,000 to Owen,and $6,000 to Pat.The three creditors enter into an agreement with Mike to discharge the debts on payment of a sum of $12,000 to them,to be divided proportionately.This is

A)a composition agreement.
B)a guaranty agreement.
C)a judicial lien.
D)a suretyship agreement.

Question 25

Pola files a petition in bankruptcy.Pola's non-dischargeable debts include

A)domestic-support obligations.
B)student loans if payment would impose undue hardship.
C)unpaid loans to finance home repairs.
D)unsecured credit-card debt.

Question 26

Thirty-one days before filing a petition in bankruptcy,Frida 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 27

Zeke files a petition in bankruptcy for relief through an individual's repayment plan.Zeke's 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 28

Fact Pattern
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 15-2B.Mary will receive

A)0.
B)$30,000.
C)$50,000.
D)$60,000.

Question 29

Suchin's debt to Trixie is past due.Trixie obtains a judgment against Suchin to collect the debt,but Suchin refuses to pay.Trixie asks the court to order the seizure and sale of Suchin's property.This is a request for

A)a guaranty (or suretyship)contract.
B)an order that would violate most states' laws.
C)an order of receivership.
D)a writ of execution.

Question 30

Bill and Cody agree to guarantee Wyatt's debt.Bill's maximum liability is $60,000,and Cody's is $40,000.Wyatt owes $40,000 and is in default.Bill pays the creditor the entire amount.In the absence of an agreement to the contrary,Bill can recover from Cody

A)0.
B)$16,000.
C)$20,000.
D)$40,000.

Question 31

Fact Pattern
Rico signs a lease on behalf of Start-Up Games,Inc. ,with Tower Office Suites.As part of the lease,Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.

-Refer to Fact Pattern 15-1B.If Start-Up stops paying the rent,it is most likely that liability or loss for the unpaid amount will rest with

A)no one.
B)Rico and Start-Up.
C)Tower Office Suites.
D)the other tenants on the same property.

Question 32

Fact Pattern
Rico signs a lease on behalf of Start-Up Games,Inc. ,with Tower Office Suites.As part of the lease,Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 15-1B.The reason for the result in the previous question is that

A)Rico signed a "GUARANTY."
B)Tower Office Suites owns the property and can re-rent the premises.
C)the other tenants can equitably absorb a slight increase in rent.
D)Start-Up will likely move out when it stops paying the rent.

Question 33

To adjust debts and institute a repayment plan that is less expensive and less complicated than other options,Brunch & Lunch Café,a small business,may file a petition in bankruptcy for relief through

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.

Question 34

Checkerboard Pizza,Inc.(CPI),files a petition in bankruptcy for relief through a reorganization.CPI'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 35

Fact Pattern
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 15-2B.Nina may recover

A)0.
B)$30,000.
C)$50,000.
D)$60,000.

Question 36

Fact Pattern
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 15-2B.If Nina recovers less than she is owed,she can realize the difference from

A)any property that Mary owns.
B)only exempt property that Mary owns.
C)only nonexempt property that Mary owns.
D)property that any other member of Mary's family owns.

Question 37

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

A)a liquidation.
B)a reorganization.
C)a repayment plan.
D)a family-farmer bankruptcy plan.

Question 38

Delilah files a petition in bankruptcy.The proceeding is governed by the Bankruptcy Code,which is part of

A)state law.
B)federal law.
C)the U.S.Constitution.
D)international law.

Question 39

Urbana performs a contract with Virgil to add a sun porch to Virgil's house,but Virgil does not pay.In most states,Urbana can create a lien and place it on Virgil's property by filing

A)a written guaranty contract.
B)a writ of attachment.
C)a writ of execution.
D)a written notice of lien.

Question 40

Bartleby owes $5,000 to Countryside Credit Union.As a prejudgment remedy to collect the debt,Countryside could use

A)attachment.
B)contribution.
C)execution.
D)subrogation.

Question 41

Brie is a student at Collegiate University.In need of funds to pay for tuition and books,Brie asks Dependable Bank for a short-term loan.The bank agrees to make a loan if Brie will have someone who is financially responsible guarantee the loan payments.Esperanza,a well-known businessperson and a friend of Brie's family,calls the bank and agrees to pay the loan if Brie cannot.Because of Esperanza's reputation,the loan is made.Brie is making the payments,but because of illness she is unable to work for one month.She asks Dependable extend the loan for three months.The bank agrees,raising the interest rate for the extended period.Esperanza is not notified of the extension (and thus does not consent to it).One month later,Brie drops out of school.All attempts to collect the remainder of the loan from Brie fail.Can Dependable assert a claim against Esperanza on the debt?

Question 42

First State Bank is a secured party on a $5,000 loan to Geoff,who owns Happy Hours,a nightclub.When Geoff experiences financial difficulty,creditors other than First State Bank petition him into involuntary bankruptcy.The value of the secured collateral has substantially decreased in value.On its sale,the debt to First State Bank is reduced to $2,500.Geoff's estate consists of $100,000 in exempt assets and $2,000 in nonexempt assets.After the bankruptcy costs and back wages to Geoff's employees are paid,nothing is left for unsecured creditors.Geoff receives a discharge in bankruptcy.Later he decides to go back into business.By selling a few exempt assets and getting a small loan,he is able to buy the Idle Inn,a small,but profitable,restaurant.Geoff goes to First State Bank for the loan.The bank claims that the balance of its secured debt was not discharged in Geoff's bankruptcy.He signs an agreement to pay First State Bank the $2,500,and the bank makes a new unsecured loan to him.Is First State Bank correct that the balance of its secured debt was not discharged in bankruptcy ?What is the legal effect of Geoff's agreement to pay the bank $2,500 after the discharge in bankruptcy?