Question 1

A purchase-money security interest in a consumer goods loan is perfected

Accepted Answer

A) automatically. 
B) by possession. 
C) by filing. 
D) all of the responses are correct.

Question 2

Under a guaranty of ________,the guarantor's obligation to pay the lender is triggered automatically when the debtor fails to make a payment when due.

Accepted Answer

A) security 
B) collection 
C) payment 
D) performance

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

Question 4

Fact pattern 24-1
Bailey has been making large credit card purchases for months.He has also borrowed money from his Jack and Susan who are friends of his so that he can continue his rather lavish lifestyle.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 card and starts to consider filing for bankruptcy.He does,however,want to pay some of his debts.He starts the New Year off by paying his mother off on January 1.Then,on June 1 he pays Jack; and on July 4,he pays Susan.Bailey proceeds to file bankruptcy on August 1 because he has repaid anyone he really cares about.He plans to complete the bankruptcy and move to the Caribbean.
-Refer to fact pattern 24-1.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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

A ________ is an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until another creditor of the same debtor is fully paid.

Accepted Answer

A) participation loan 
B) cross-collateralization 
C) debt subordination 
D) lien subordination

Question 8

Fact pattern 24-1
Bailey has been making large credit card purchases for months.He has also borrowed money from his Jack and Susan who are friends of his so that he can continue his rather lavish lifestyle.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 card and starts to consider filing for bankruptcy.He does,however,want to pay some of his debts.He starts the New Year off by paying his mother off on January 1.Then,on June 1 he pays Jack; and on July 4,he pays Susan.Bailey proceeds to file bankruptcy on August 1 because he has repaid anyone he really cares about.He plans to complete the bankruptcy and move to the Caribbean.
-Refer to fact pattern 24-1.Which of the following is true regarding the repayment of the loans from Jack and Susan?

Accepted Answer

A) The payment to Susan would be considered a preference because it was made within 30 days of the filing for bankruptcy,but the payment to Jack would not be considered a preference because it was made more than 30 days prior to the bankruptcy filing. 
B) Payments to both Jack and Susan would be considered preferences because they were made within 90 days of the filing for bankruptcy. 
C) Payments to both Jack and Susan would be considered preferences because Jack and Susan are insiders,and the payments were made within one year of the bankruptcy filing. 
D) The payments would not be considered preferences.

Question 9

In a ________ loan,more than one lender enters into concurrent direct obligations with the borrower to make the loan.

Accepted Answer

A) participation 
B) term sheet 
C) syndicated 
D) none of the above

Question 10

________ is the coercion of the borrower by threatening to do an unlawful act that might injure the borrower's business or property.

Accepted Answer

A) Financial blackmail 
B) Economic duress 
C) Monetary extortion 
D) None of the above.

Question 11

After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement.

Accepted Answer

A) True 
 B)False

Question 12

What is a preference under the bankruptcy code? What time period is reviewed to determine if a preference has occurred? When does a long-term debt payment to a bank qualify under the ordinary course of business exception?

Accepted Answer

The answer of What is a preference under the bankruptcy...

Question 13

An equipment lease that serves the purpose of financing is known as a(n)________ lease.

Accepted Answer

A) finance 
B) temporary 
C) lending 
D) debtor's

Question 14

Transnational insolvency involves an insolvency proceeding in one country with a creditor located in a second country.

Accepted Answer

A) True 
 B)False

Question 15

An individual may file for federal bankruptcy protection under

Accepted Answer

A) Chapter 7 
B) Chapter 11 
C) Chapter 13 
D) All of the responses are correct

Question 16

Zane has been living above his means for many months.He has run up thousands of dollars in credit card charges.Zane is strongly considering bankruptcy but he wants to hide away some cash first.Therefore,he sells to his best friend Kate at a substantial discount a number of things he bought including golf clubs,jewelry,and electronics.Kate had no idea that Zane was contemplating bankruptcy and just thought that Zane was getting rid of some things he did not want.Four months later,Zane files and is allowed to proceed under a Chapter 7 bankruptcy.Mick,who knew that Zane had filed for bankruptcy,overhears Kate bragging about how much she was enjoying Zane's stuff that she got at a significant discount,and he notifies the bankruptcy judge.Which of the following is true regarding Kate's situation?

Accepted Answer

A) Kate will be allowed to keep the items because regardless of what she paid,she purchased them over 90 days before Zane filed for bankruptcy protection. 
B) Kate will be allowed to keep the items if she paid at least 50% of the market value for them. 
C) Under these facts,Kate will be allowed to keep the items if she paid at least 70% of the market value for them. 
D) Because this is a fraudulent transfer,Kate will not be able to keep the items.

Question 17

The debtor-in-possession must honor all prebankruptcy executory contracts.

Accepted Answer

A) True 
 B)False

Question 18

The ________ interest rate is based on the cost of borrowing offshore U.S.dollars in the global interbank market.

Accepted Answer

A) International Rate Exchange 
B) Frankfurt International Trade Rate 
C) London Interbank Offered Rate 
D) New York Exchange Rate

Question 19

________ a security interest means that it is made valid as against other creditors of the debtor.

Accepted Answer

A) Finalizing 
B) Perfecting 
C) Organizing 
D) Signing

Question 20

In a ________ bankruptcy under Chapter 11,the debtor solicits votes on its plan of reorganization and only files for Chapter 11 protection after it has obtained the required votes in favor of the plan.

Accepted Answer

A) preapproved 
B) preplanned 
C) prepackaged 
D) prenegotiated

Exam 24: Debtor-Creditor Relations and Bankruptcy

A purchase-money security interest in a consumer goods loan is perfected

Under a guaranty of ________,the guarantor's obligation to pay the lender is triggered automatically when the debtor fails to make a payment when due.

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

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 unlimited amount.

A ________ is an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until another creditor of the same debtor is fully paid.

In a ________ loan,more than one lender enters into concurrent direct obligations with the borrower to make the loan.

________ is the coercion of the borrower by threatening to do an unlawful act that might injure the borrower's business or property.

After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement.

What is a preference under the bankruptcy code? What time period is reviewed to determine if a preference has occurred? When does a long-term debt payment to a bank qualify under the ordinary course of business exception?

An equipment lease that serves the purpose of financing is known as a(n) ________ lease.

Transnational insolvency involves an insolvency proceeding in one country with a creditor located in a second country.

An individual may file for federal bankruptcy protection under

The debtor-in-possession must honor all prebankruptcy executory contracts.

The ________ interest rate is based on the cost of borrowing offshore U.S.dollars in the global interbank market.

________ a security interest means that it is made valid as against other creditors of the debtor.

In a ________ bankruptcy under Chapter 11,the debtor solicits votes on its plan of reorganization and only files for Chapter 11 protection after it has obtained the required votes in favor of the plan.