Question 1

Under the Bankruptcy Act, the debtor must file which of the following?

Accepted Answer

A)  A list of creditors. 
B)  Copies of tax returns for the previous five years. 
C)  A list of family members and persons who might be considered "insiders." 
D)  All of these. 
A)  A list of creditors. 
B)  Copies of tax returns for the previous five years. 
C)  A list of family members and persons who might be considered "insiders." 
D)  All of these.

Question 2

Which of the following claims will be paid first from the debtor's estate under Chapter 7?

Accepted Answer

A)  A gap creditor with a claim of $2,000. 
B)  A state claiming $5,000 in back taxes. 
C)  The trustee's expenses of $3,000. 
D)  Employees claiming unpaid wages of $5,000 for wages earned within 90 days of the bankruptcy filing. 
A)  A gap creditor with a claim of $2,000. 
B)  A state claiming $5,000 in back taxes. 
C)  The trustee's expenses of $3,000. 
D)  Employees claiming unpaid wages of $5,000 for wages earned within 90 days of the bankruptcy filing.

Question 3

A trustee in bankruptcy may avoid which of the following?

Accepted Answer

A)  Fraudulent transfers. 
B)  Voidable preferences. 
C)  Automatic stays. 
D)  Both fraudulent transfers and voidable preferences. 
A)  Fraudulent transfers. 
B)  Voidable preferences. 
C)  Automatic stays. 
D)  Both fraudulent transfers and voidable preferences.

Question 4

Most student loans cannot be discharged under Chapter 13.

Accepted Answer

A) True 
 B)False

Question 5

The Packer Video Company files for Chapter 7 bankruptcy. Its only non-exempt asset is a piece of equipment valued at $15,000. The claims that have been approved by the trustee are as follows:
(1) $2,500 in expenses of the trustee in the administration of the estate.
(2) $4,000 in wages, salaries, and commissions earned by employees within ninety days before the filing of the bankruptcy petition and the cessation of the business.
(3)
$500 in employment taxes owed to the state.
(4) Unsecured claims in the amount of $10,000.
(5) A perfected security interest in the amount of $2,000 which is held by First Bank and which is secured by the item of equipment.
How much money will be available to pay the general unsecured creditors who have no priority?

Accepted Answer

A)  $15,000 
B)  $13,000 
C)  $10,500 
D)  $6,000 
A)  $15,000 
B)  $13,000 
C)  $10,500 
D)  $6,000

Question 6

In reorganization cases the creditors usually look to the debtor's property at the commencement of the bankruptcy proceeding.

Accepted Answer

A) True 
 B)False

Question 7

One type of fraudulent transfer consists of the:

Accepted Answer

A)  distribution of the debtor's property among creditors. 
B)  debtor's transferring property with actual intent to hinder her creditors. 
C)  avoidance of statutory liens when debtor becomes insolvent. 
D)  discharge of debts of unsecured tardy creditors. 
A)  distribution of the debtor's property among creditors. 
B)  debtor's transferring property with actual intent to hinder her creditors. 
C)  avoidance of statutory liens when debtor becomes insolvent. 
D)  discharge of debts of unsecured tardy creditors.

Question 8

Regarding priority claims:

Accepted Answer

A)  each claimant in a priority class shares pro rata if the assets cannot satisfy all claims in the class. 
B)  employees have a priority for contributions to employee benefit plans but only to the extent that the $4,500 cap for unpaid wages has not been reached. 
C)  subordination agreements are not enforceable. 
D)  All of these statements are true of priority claims. 
A)  each claimant in a priority class shares pro rata if the assets cannot satisfy all claims in the class. 
B)  employees have a priority for contributions to employee benefit plans but only to the extent that the $4,500 cap for unpaid wages has not been reached. 
C)  subordination agreements are not enforceable. 
D)  All of these statements are true of priority claims.

Question 9

More than 20 percent of all bankruptcy petitions are filed involuntarily.

Accepted Answer

A) True 
 B)False

Question 10

A plan of reorganization under Chapter 13 will be confirmed when the:

Accepted Answer

A)  debtor has not been discharged before. 
B)  unsecured creditors are not discharged. 
C)  unsecured creditors receive the same amount as the secured creditors. 
D)  unsecured creditors receive at least as much as they would have if the debtor had liquidated. 
A)  debtor has not been discharged before. 
B)  unsecured creditors are not discharged. 
C)  unsecured creditors receive the same amount as the secured creditors. 
D)  unsecured creditors receive at least as much as they would have if the debtor had liquidated.

Question 11

The court has the sole right to accept or reject a proposed plan of reorganization under Chapter 11.

Accepted Answer

A) True 
 B)False

Question 12

Monica's husband is an accountant who keeps the books for her business. When it goes bankrupt, will Monica's husband's claim for services be allowed by the bankruptcy courts?

Accepted Answer

A)  No, since he is an insider. 
B)  No, because it would be difficult to prove that services were actually rendered. 
C)  Yes, but only up to the reasonable value. 
D)  Yes, as long as he is not an officer of the corporation. 
A)  No, since he is an insider. 
B)  No, because it would be difficult to prove that services were actually rendered. 
C)  Yes, but only up to the reasonable value. 
D)  Yes, as long as he is not an officer of the corporation.

Question 13

A court-supervised procedure in which a trustee sells the debtor's nonexempt assets and distributes the proceeds to creditors in accordance with the provisions of the Bankruptcy Code is called:

Accepted Answer

A)  discharge 
B)  reorganization 
C)  liquidation 
D)  distribution 
A)  discharge 
B)  reorganization 
C)  liquidation 
D)  distribution

Question 14

A private employer:

Accepted Answer

A)  may terminate the employment of an individual solely because he has been a debtor in bankruptcy. 
B)  may not discriminate with regard to employment solely because an individual was insolvent before the commencement of a bankruptcy case. 
C)  has no restrictions regarding employment practices involving individuals who are or have been debtors under the Bankruptcy Code. 
D)  may discriminate with respect to employment against an individual who has not paid a debt that is dischargeable in a case under the Bankruptcy Code. 
A)  may terminate the employment of an individual solely because he has been a debtor in bankruptcy. 
B)  may not discriminate with regard to employment solely because an individual was insolvent before the commencement of a bankruptcy case. 
C)  has no restrictions regarding employment practices involving individuals who are or have been debtors under the Bankruptcy Code. 
D)  may discriminate with respect to employment against an individual who has not paid a debt that is dischargeable in a case under the Bankruptcy Code.

Question 15

Any person eligible to be a debtor under a given bankruptcy proceeding may file a voluntary petition, but must be insolvent to do so.

Accepted Answer

A) True 
 B)False

Question 16

John's brother, Phil, loaned him $10,000 to start his business. John didn't do too well and planned to file for bankruptcy. In May, he gave Phil his car worth $8,000 to satisfy the debt. John filed his petition in November. After liquidation, if the car were included in his assets, every unsecured debtor would have received 85% of the debt owing to him. Will this be a voidable preference?

Accepted Answer

A)  Yes, since Phil is an insider. 
B)  No, because the transfer was made more than 90 days prior to filing. 
C)  Yes, because the transfer was made within the prior year. 
D)  No, because Phil did not receive preferential treatment over other creditors. 
A)  Yes, since Phil is an insider. 
B)  No, because the transfer was made more than 90 days prior to filing. 
C)  Yes, because the transfer was made within the prior year. 
D)  No, because Phil did not receive preferential treatment over other creditors.

Question 17

Which of the following debts are dischargeable in a Chapter 7 bankruptcy proceeding?

Accepted Answer

A)  A $10,000 judgment that has not yet been executed. 
B)  Medical expenses of $25,000. 
C)  Credit card debts of $15,000 from two years ago. 
D)  All of these are dischargeable. 
A)  A $10,000 judgment that has not yet been executed. 
B)  Medical expenses of $25,000. 
C)  Credit card debts of $15,000 from two years ago. 
D)  All of these are dischargeable.

Question 18

Under Chapter ___________, certain debts of individuals are not dischargeable despite the debtor's good faith.

Accepted Answer

A)  7 only 
B)  7 and 11 only 
C)  11 and 13 only 
D)  7, 11 and 13. 
A)  7 only 
B)  7 and 11 only 
C)  11 and 13 only 
D)  7, 11 and 13.

Question 19

Chapter 3 of the Bankruptcy Code deals with:

Accepted Answer

A)  the meetings of creditors. 
B)  the officers who administer the case. 
C)  the administrative powers of the officers who administer the case. 
D)  All of the above. 
A)  the meetings of creditors. 
B)  the officers who administer the case. 
C)  the administrative powers of the officers who administer the case. 
D)  All of the above.

Question 20

Alimony and support payments owed to the debtor who files bankruptcy are part of the bankruptcy estate that can be distributed to the debtor's creditors for the payment of allowed claims filed with the bankruptcy court.

Accepted Answer

A) True 
 B)False

Exam 38: Bankruptcy

Under the Bankruptcy Act, the debtor must file which of the following?

Which of the following claims will be paid first from the debtor's estate under Chapter 7?

A trustee in bankruptcy may avoid which of the following?

Most student loans cannot be discharged under Chapter 13.

In reorganization cases the creditors usually look to the debtor's property at the commencement of the bankruptcy proceeding.

One type of fraudulent transfer consists of the:

Regarding priority claims:

More than 20 percent of all bankruptcy petitions are filed involuntarily.

A plan of reorganization under Chapter 13 will be confirmed when the:

The court has the sole right to accept or reject a proposed plan of reorganization under Chapter 11.

Monica's husband is an accountant who keeps the books for her business. When it goes bankrupt, will Monica's husband's claim for services be allowed by the bankruptcy courts?

A court-supervised procedure in which a trustee sells the debtor's nonexempt assets and distributes the proceeds to creditors in accordance with the provisions of the Bankruptcy Code is called:

A private employer:

Any person eligible to be a debtor under a given bankruptcy proceeding may file a voluntary petition, but must be insolvent to do so.

Which of the following debts are dischargeable in a Chapter 7 bankruptcy proceeding?

Under Chapter ___________, certain debts of individuals are not dischargeable despite the debtor's good faith.

Chapter 3 of the Bankruptcy Code deals with:

Alimony and support payments owed to the debtor who files bankruptcy are part of the bankruptcy estate that can be distributed to the debtor's creditors for the payment of allowed claims filed with the bankruptcy court.

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