Deck 30: A: Bankruptcy Law

Question 1

Bankruptcy relief is provided under state law.

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Before filing a petition bankruptcy,debtors must receive credit counseling from an approved non-profit agency.

Answer 3

True

Question 4

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

Question 5

A reorganization plain 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 6

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

Question 7

Any creditor listed in the schedules filed by the debtor must file a proof of claim.

Question 8

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

Question 9

A court,after notice and a hearing,may dismiss a case under reorganization "for cause."

Question 10

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

Question 11

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

Question 12

An agreement to pay a debt discharged in bankruptcy is called a workout.

Question 13

Certain debts are not dischargeable in bankruptcy.

Question 14

Bankruptcy law has one goal-to encourage the continued use of credit.

Question 15

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

Question 16

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 17

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

Question 18

The adequate protection doctrine protects secured creditors from losing their security as a result of the automatic stay.

Question 19

An individual's repayment plan under Chapter 13 can be initiated only by the debtor's filing of a voluntary petition.

Question 20

Bankruptcy proceedings are held in federal bankruptcy courts.

Question 21

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 22

Fact Pattern 30-1B
In January,Jazz Dance Studio owes Kay,its musical director,$1,800 for cur?rent wages,receives $700 as a down payment for dance lessons from Lora,and pays a Music,Inc. ,a sheet music supplier,$1,500 of $3,000 owed.In February,the studio files a petition in bankruptcy for relief through a liquidation.
Refer to Fact Pattern 30-1B.The highest priority with respect to payment of claims belongs to

A)Kay and Music,Inc.
B)Jazz Dance Studio.
C)Lora.
D)unnamed general creditors.

Question 23

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 24

Thirty-one days before filing a petition in bankruptcy,Frida transfers prop?erty and makes payments that favor one creditor over another.These are

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

Question 25

Nano Games Corporation's creditors agree to a workout with the firm.This is

A)an agreement to pay a debt dischargeable in bankruptcy.
B)an accountant's summary of a debtor's financial situation.
C)a privately negotiated adjustment of creditor-debtor relations.
D)a reorganization of corporate debts and debtors.

Question 26

To adjust debt and institute a repayment plan,Naomi,a family farmer,may file a petition in bankruptcy for relief under the Bankruptcy Code's Chapter

A)1.
B)3.
C)5.
D)12.

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.

Question 28

Ollie files a petition in bankruptcy.At the moment of filing

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

Question 29

Fact Pattern 30-1B
In January,Jazz Dance Studio owes Kay,its musical director,$1,800 for cur?rent wages,receives $700 as a down payment for dance lessons from Lora,and pays a Music,Inc. ,a sheet music supplier,$1,500 of $3,000 owed.In February,the studio files a petition in bankruptcy for relief through a liquidation.
Refer to Fact Pattern 30-1B.Based on the size of the studio's estate in bank?ruptcy,each of Jazz's creditors will get only 10 percent of their claims.Regarding the payment to Music,Inc. ,the trustee may

A)not recover it because Music's claim has priority.
B)not recover it unless Music is an in?sider.
C)recover it as a fraudulent transfer.
D)recover it as a voidable preference.

Question 30

Eli agrees to pay a debt to Financial Credit,Inc. ,which is otherwise dis?chargeable in bankruptcy.This is

A)a cram-down.
B)a revocation.
C)a reaffirmation.
D)a workout.

Question 31

Nikita operates a sole proprietorship,a corporation,and a partnership.Nikita wants to ob?tain 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 32

Petunia is a debtor.Her employer Quantum Investments,Inc. ,her ex-husband Rob,her alma mater State University,and Timely Credit Company are her creditors.For these parties,a petition in bankruptcy for relief through an individual's repayment plan could be filed by

A)Petunia only.
B)Petunia,her employer,or her creditors only.
C)Petunia or her creditors only.
D)Petunia's employer only.

Question 33

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 34

Elise goes through an involuntary bankruptcy proceeding.An invol?un?tary bankruptcy occurs when

A)creditors are forced to accept a discharge of a debtor's debts.
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 35

Mac files a petition for a discharge in bankruptcy.Mac's failure to ap?pear at a meet?ing 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 36

Lulu joins with other creditors to force McCoy,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 a fair means of distributing a debtor's assets.
D)make all debtor property available for creditors.

Question 37

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.

Question 38

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

A)collecting the property in a bankruptcy 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 39

Gem Jewelers files a voluntary petition for bankruptcy.In listing its as?sets,Gem in?tentionally omits certain valuable stones.After Gem is granted a discharge,Hor d'Ouerve Catering,one of Gem's unsecured creditors whose claims were discharged,learns of the fraud.Hor d'Ouerve can

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

Question 40

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 41

Real Estate Sales Corporation (RESC)orders office equipment from Standard Goods,Inc. ,which has an unperfected security interest in the equipment until it is paid for.Meanwhile,RESC takes out a loan from Trend Credit,Inc. ,subject to a security interest in RESC's building and equip?ment,which Trend perfects.RESC files a petition in bankruptcy for relief in a liquidation proceeding.If the petition is granted,in what or?der will RESC's creditors be paid?

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?