Question 1

Chapter 13 does not provide a bankruptcy discharge for corporations.

Accepted Answer

A) True 
 B)False  True

Question 2

What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?

Accepted Answer

A voluntary petition must be signed and sworn under oath and must state that the debtor has debts.The debtor does not have to declare insolvency.The petition must include (1)a list of secured and unsecured creditors (including addresses and amount of debt); (2)a list of all property owned by the debtor including any property claimed to be exempt; (3)a statement of the financial affairs of the debtor; and (4)a list of the debtor's current income and expenses.
An involuntary petition must allege that the debtor is not paying its debts as they come due.If the debtor has more than twelve creditors,the petition must be signed by at least three creditors.If there are twelve or fewer creditors,any creditor can sign.The signing creditor(s)must have valid unsecured claims of at least $10,000 in the aggregate.The debtor must file the same schedules filed by voluntary debtors.

Question 3

A repayment plan under a Chapter 11 bankruptcy must either be accepted unanimously or pass the "best interests of creditors" test.

Accepted Answer

A) True 
 B)False  True

Question 4

A(n)__________ guaranty is enforceable only with respect to a specified transaction or series of transactions.

Accepted Answer

A)  attached 
B)  upstream 
C)  restricted 
D)  payment 
A)  attached 
B)  upstream 
C)  restricted 
D)  payment

Question 5

Fact Pattern 23-1
Bailey has been making large credit card purchases for months. He has also borrowed money from Jack and Susan, friends of his, so that he can continue his rather lavish lifestyle involving foreign travel. He borrowed $1,000 from Jack and $2,000 from Susan. He also borrowed $500 from his mother. Bailey finally decides that he can no longer continue to make even the minimum payments on his credit cards and considers filing for bankruptcy. He does, however, want to pay some of his debts. Bailey, therefore, puts off the credit card companies and saves his cash. He starts the New Year off by paying on January 1 all funds owed to his mother. He was particularly concerned about repaying his mother because he still lived at home and had some concerns that she would kick him out of the house if he did not repay her. Then, on June 1 he pays Jack; and on July 4, he pays Susan. Bailey proceeds to file bankruptcy on August 2 because he has repaid anyone he really cares about. He plans to complete the bankruptcy and move to the Caribbean.
-Refer to Fact Pattern 23-1.Which of the following is true regarding the repayment of the loan to Bailey's mother?

Accepted Answer

A)  It will be considered a preference because Bailey's mother would be considered an insider, and it was made within one year of the filing for bankruptcy. 
B)  Although Bailey's mother would not be considered an insider, the payment would be considered a preference because it was made within one year of the filing for bankruptcy. 
C)  The filing will be considered a preference only if Bailey and his mother had an agreement that she would advance the amounts to him again once the bankruptcy was completed. 
D)  The payment would not be considered a preference because it was not made within 30 days of the filing for bankruptcy. 
A)  It will be considered a preference because Bailey's mother would be considered an insider, and it was made within one year of the filing for bankruptcy. 
B)  Although Bailey's mother would not be considered an insider, the payment would be considered a preference because it was made within one year of the filing for bankruptcy. 
C)  The filing will be considered a preference only if Bailey and his mother had an agreement that she would advance the amounts to him again once the bankruptcy was completed. 
D)  The payment would not be considered a preference because it was not made within 30 days of the filing for bankruptcy.

Question 6

Matthew has filed for Chapter 7 bankruptcy relief.He had borrowed money from his best friend,Rick,for the purchase of a car.Matthew really wants to repay Rick,but does not want to jeopardize his bankruptcy relief and the discharge of a number of other debts.What option,if any,is open to Matthew?

Accepted Answer

A)  No options are open to Matthew because any payment to Rick would be considered a voidable preference. 
B)  Matthew can reaffirm the debt to Rick, and the bankruptcy judge has no authority to interfere in that decision. 
C)  Matthew can reaffirm the debt to Rick, but the bankruptcy judge has the authority to disapprove of the agreement if the court finds that it is not in Matthew's best interest. 
D)  Matthew can reaffirm the debt to Rick but only up to 50% of the maximum amount owed, and the bankruptcy judge has the authority to disapprove of the agreement if the court finds that it is not in Matthew's best interest. 
A)  No options are open to Matthew because any payment to Rick would be considered a voidable preference. 
B)  Matthew can reaffirm the debt to Rick, and the bankruptcy judge has no authority to interfere in that decision. 
C)  Matthew can reaffirm the debt to Rick, but the bankruptcy judge has the authority to disapprove of the agreement if the court finds that it is not in Matthew's best interest. 
D)  Matthew can reaffirm the debt to Rick but only up to 50% of the maximum amount owed, and the bankruptcy judge has the authority to disapprove of the agreement if the court finds that it is not in Matthew's best interest.

Question 7

Agreements for term or revolving loans may call for mandatory prepayment when certain events occur.

Accepted Answer

A) True 
 B)False

Question 8

A revolving loan is based upon the continuous extension of credit of an unlimited amount.

Accepted Answer

A) True 
 B)False

Question 9

One popular method in Chapter 11 cases is called a(n)__________ bankruptcy,in which the company solicits votes on its plan of reorganization prior to filing bankruptcy.

Accepted Answer

A)  prepackaged 
B)  cramdown 
C)  workout 
D)  confirmation 
A)  prepackaged 
B)  cramdown 
C)  workout 
D)  confirmation

Question 10

Which of the following is NOT true regarding methods of perfection?

Accepted Answer

A)  A security interest in a deposit account may be perfected only by taking control of the collateral. 
B)  A security interest in a letter-of-credit right may be perfected only by taking control of the collateral. 
C)  A security interest in money may be perfected either through possession or through filing a financing statement. 
D)  For a limited period, a purchase-money security interest in consumer goods is automatically perfected. 
A)  A security interest in a deposit account may be perfected only by taking control of the collateral. 
B)  A security interest in a letter-of-credit right may be perfected only by taking control of the collateral. 
C)  A security interest in money may be perfected either through possession or through filing a financing statement. 
D)  For a limited period, a purchase-money security interest in consumer goods is automatically perfected.

Question 11

A(n)__________ subordination is an agreement between two secured creditors by which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law.

Accepted Answer

A)  unenforceable 
B)  debt 
C)  lien 
D)  equitable 
A)  unenforceable 
B)  debt 
C)  lien 
D)  equitable

Question 12

In order to arrive at an actual interest rate,a __________ is an amount added to the bank's theoretical cost of obtaining funds to lend.

Accepted Answer

A)  spread 
B)  base 
C)  reference 
D)  security 
A)  spread 
B)  base 
C)  reference 
D)  security

Question 13

Which of the following is NOT true regarding remedies for default of a security agreement?

Accepted Answer

A)  After default, the secured party has the right to take possession of the collateral so long as judicial process is followed. 
B)  After properly taking possession of the property, the secured party may then dispose of the collateral at a public or private sale. 
C)  If there is a surplus from the sale of collateral, the secured parry is required to return it to the debtor. 
D)  If there is a deficiency from the sale of collateral, the debtor remains liable for that amount 
A)  After default, the secured party has the right to take possession of the collateral so long as judicial process is followed. 
B)  After properly taking possession of the property, the secured party may then dispose of the collateral at a public or private sale. 
C)  If there is a surplus from the sale of collateral, the secured parry is required to return it to the debtor. 
D)  If there is a deficiency from the sale of collateral, the debtor remains liable for that amount

Question 14

A bank's __________ rate is the lowest published rate of interest at which the bank lends to its best and most creditworthy commercial customers.

Accepted Answer

A)  lien 
B)  term 
C)  prime 
D)  secured 
A)  lien 
B)  term 
C)  prime 
D)  secured

Question 15

A(n)__________ loan is one in which the original lender sells shares to other parties.

Accepted Answer

A)  master 
B)  syndicated 
C)  participation 
D)  attached 
A)  master 
B)  syndicated 
C)  participation 
D)  attached

Question 16

A creditor's claim in bankruptcy may be involuntarily postponed through application of the doctrine of equitable subordination.

Accepted Answer

A) True 
 B)False

Question 17

A loan agreement may be preceded by a(n)__________ which is a letter outlining the terms and conditions on which the lender will lend.

Accepted Answer

A)  term sheet 
B)  advance notification 
C)  contract addendum 
D)  attachment 
A)  term sheet 
B)  advance notification 
C)  contract addendum 
D)  attachment

Question 18

Requirements that must be met under the loan agreement before the lender's obligations arise are known as:

Accepted Answer

A)  conditions precedent. 
B)  conditions concurrent. 
C)  conditions subsequent. 
D)  loan qualifiers. 
A)  conditions precedent. 
B)  conditions concurrent. 
C)  conditions subsequent. 
D)  loan qualifiers.

Question 19

In CASE 23.2Executive Benefits Insurance Agency v.Arkinson(2014)the U.S.SupremeCourt ruled that some claims Congress labeled as "core" (so-called Stern claims)cannot be adjudicated by a bankruptcy court even if all the parties consent to the bankruptcy court's jurisdiction in advance.

Accepted Answer

A) True 
 B)False

Question 20

The UCC requires that a precise form be followed in order to create a security interest.

Accepted Answer

A) True 
 B)False

Exam 23: Debtor-Creditor Relations and Bankruptcy.

Chapter 13 does not provide a bankruptcy discharge for corporations.

What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?

A repayment plan under a Chapter 11 bankruptcy must either be accepted unanimously or pass the "best interests of creditors" test.

A(n)__________ guaranty is enforceable only with respect to a specified transaction or series of transactions.

Matthew has filed for Chapter 7 bankruptcy relief.He had borrowed money from his best friend,Rick,for the purchase of a car.Matthew really wants to repay Rick,but does not want to jeopardize his bankruptcy relief and the discharge of a number of other debts.What option,if any,is open to Matthew?

Agreements for term or revolving loans may call for mandatory prepayment when certain events occur.

A revolving loan is based upon the continuous extension of credit of an unlimited amount.

One popular method in Chapter 11 cases is called a(n)__________ bankruptcy,in which the company solicits votes on its plan of reorganization prior to filing bankruptcy.

Which of the following is NOT true regarding methods of perfection?

A(n)__________ subordination is an agreement between two secured creditors by which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law.

In order to arrive at an actual interest rate,a __________ is an amount added to the bank's theoretical cost of obtaining funds to lend.

Which of the following is NOT true regarding remedies for default of a security agreement?

A bank's __________ rate is the lowest published rate of interest at which the bank lends to its best and most creditworthy commercial customers.

A(n)__________ loan is one in which the original lender sells shares to other parties.

A creditor's claim in bankruptcy may be involuntarily postponed through application of the doctrine of equitable subordination.

A loan agreement may be preceded by a(n)__________ which is a letter outlining the terms and conditions on which the lender will lend.

Requirements that must be met under the loan agreement before the lender's obligations arise are known as:

In CASE 23.2Executive Benefits Insurance Agency v.Arkinson(2014)the U.S.SupremeCourt ruled that some claims Congress labeled as "core" (so-called Stern claims)cannot be adjudicated by a bankruptcy court even if all the parties consent to the bankruptcy court's jurisdiction in advance.

The UCC requires that a precise form be followed in order to create a security interest.

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