Business Law II Exam Ch.21

True

A bankruptcy court may disallow a petition for a Chapter 7 bankruptcy if the individual does not meet the standards of the means test.

Means Test

A complex formula that measures an individuals income relative to the median income of the people in the state where he or she resides.

Secured Debt

A debt for which a specific asset is used as collateral.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

A federal law that instituted strict rules and eligibility requirements for debtors filing for bankruptcy.

Straight Bankruptcy

A form of bankruptcy in which a trustee collects the debtors nonexempt property, sells it, and dispenses the proceeds.

Reorganization Bankruptcy

A form of bankruptcy in which the debtor agrees to pay back all or a portion of his or her debts over a period spanning from three to five years.

Involuntary

A form of bankruptcy that occurs when creditors pressure a debtor to file.

Voluntary Filing

A form of bankruptcy that occurs when the debtor himself or herself files a bankruptcy petition.

Liquidation

A process in which assets are sold to obtain cash.

Fraudulent Transfer

A transaction in which the debtor sells property for an amount far below its market value.

Preferential Payment

A transfer of funds in which the debtor gives favorable treatment to one creditor over another.

False

All bankruptcy filings are involuntary.

True

All debtors wishing to file for bankruptcy must receive individual or group credit counseling from an approved, not-for-profit, individual or group budget or credit counseling agency.

Debtor

An individual or business that owes money.

Creditor

An individual or business to which money is owed.

Priority Debt

An item deemed sufficiently important under Chapter 13 of the bankruptcy law that it must be paid in full.

True

Bankruptcies are governed under both federal and state law.

True

Chapter 12 bankruptcy was specifically created to adjust the debts of family famers or fishers who earn an annual income.

True

Chapter 13 bankruptcy is sometimes referred to as reorganization bankruptcy.

False

Chapter 9 bankruptcy is sometimes referred to as straight or liquidation bankruptcy.

False

In a Chapter 11 bankruptcy, all daily business decisions much be made and implemented by the bankruptcy court.

True

In most instances, when bankruptcy is filed, the debtors assets are sold and the money is disturbed among the debtors creditors to pay the debt that is owed.

False

Persons familiar with good accounting practices recognize that assets should never exceed liabilities.

Bankruptcy

The legal state that occurs when a debtor is insolvent, is in default, and is unable to fulfill his or her obligations to pay back his or her creditors.

Default

The state in which a debtor fails to meet one or more financial obligations to his or her creditors.

Insolvency

The state occurs when an individuals or businesses liabilities exceed assets.

Assets

The value of the property an individual or business owns.

Liabilities

The value of what an individual or business owes.