Extra: Chapt. 39 Bankruptcy
Able gets a judgment against Baker in state court for $50,000 on July 1. On July 15, Baker files a bankruptcy petition under Chapter 7. a. Able is a lien creditor. b. Unsecured creditors will share proportionately with Able. c. The judgment is a preferential transfer that will be invalidated by the trustee. d. Both (a) and (b) are true.
A
An ordinary contract between the debtor and his creditors whereby the creditors receive pro rata a part of their claims and the debtor is discharged from the balance of the claims is: a. a non-statutory composition. b. a statutory assignment. c. an equity receivership. d. an automatic stay.
A
Automatic perfection means that: a. no financing statement need be filed. b. no agreement need be made between the debtor and the secured party. c. no value need be advanced. d. All of the above.
A
Confirmation of a plan for reorganization under Chapter 13 may be given only if: a. the plan complies with applicable law and is given in good faith. b. the plan provides for payments longer than three years. c. the debtor remains in possession of the estate. d. all of the creditors agree to accept it.
A
If the surety is a(n) ___________, then the creditor may hold the surety liable as soon as the principal debtor defaults. a. absolute surety b. conditional surety c. subrogee d. mortgagee
A
In bankruptcy law, an insider may include: a. a relative. b. a general or limited partner of the debtor. c. the trustee. d. Both (a) and (b).
A
Ken loaned Barbara $8,000 and took back a note secured by Barbara's car. If Barbara files for bankruptcy when the value of the car is $4,500, what is Ken's status? He has a (n): a. secured claim for $4,500. b. unsecured claim for $8,000. c. unsecured claim for $4,500. d. secured claim for $8,000.
A
Pre-judgment attachment permits a creditor to seize the debtor's property: a. to prevent the debtor from disposing of assets before litigation would result in a judgment for the creditor. b. if the defendant has not paid his debts on time. c. when the defendant has filed for bankruptcy. d. if the defendant cannot be persuaded to come to court.
A
Regarding 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. Both (a) and (c) are correct. e. (a), (b), and (c).
A
Under Article 9 of the UCC, a pledge is: a. the delivery of personal property to a creditor as security for the payment of a debt. b. a requirement that the secured party and the debtor agree to certain collateral. c. an equipment transfer before a forced sale. d. a form of indispensable paper.
A
Under Chapter ___________, the bankruptcy estate does not include wages earned after commencement of the case. a. 7 b. 11 c. 13 d. All of the above
A
Under the Code, collateral is classified according to: a. its nature and use. b. the fundamental rights of the secured party. c. the fundamental rights of the debtor. d. None of the above.
A
What party(ies) is/are involved in a suretyship relationship? a. The principal debtor. b. An ancillary bailee. c. Principal bailee. d. All of the above.
A
What term is used to describe the creation of a security interest that is enforceable against the debtor? a. Attachment. b. Pledge. c. Perfection. d. Lien.
A
Which of the following debts would be discharged in bankruptcy? a. Consumer credit loans for a stove. b. Property taxes on a beach house. c. Student loans maturing one-year prior to bankruptcy filing. d. Alimony payments past due.
A
Which of the following is true? a. A security agreement may create or provide for a security interest in property that the debtor presently does not own or have rights to. b. Obligations covered by a security agreement may not include future advances. c. Federal regulation allows a credit seller or lender to obtain a nonpossessory security interest in a consumer's household goods, such as furniture, appliances, and clothing, whether as a purchase money security interest or otherwise. d. Encryption of a record cannot serve as a debtor's authentication of a security agreement.
A
With the exception of pledges, a security agreement must: a. be in an authenticated record. b. be signed by the debtor with his personal, not business, name. c. contain at least a generic description of the collateral, such as "all my personal property." d. (a) and (b) are correct. e. (b) and (c) are correct.
A
A private employer: 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.
B
All but which one of the following is a purpose of bankruptcy legislation? a. To preserve existing business relations. b. To punish recalcitrant debtors. c. To bring about a quick, equitable distribution of the debtor's property among creditors. d. To allow rehabilitation of debtors.
B
An involuntary petition for bankruptcy can be filed against a: a. non-profit charitable organization. b. partnership that invests in real estate. c. life insurance company. d. wheat farmer.
B
An involuntary petition in bankruptcy: a. eliminates the operation of an automatic stay. b. may only be filed under Chapter 7 or 11. c. must be filed by the trustee. d. eliminates the need for the court to order a discharge.
B
An undertaking by a surety to protect an employer against the dishonesty of an employee is a(n): a. performance bond. b. fidelity bond. c. judicial bond. d. official bond.
B
Dr. Wells purchased a refrigerator for use in storing medications at his office. The refrigerator will be classified as: a. consumer goods. b. equipment. c. a fixture. d. inventory.
B
Gary decided to borrow from Jones Bank since it promised that his loan interest rate would be systematically reduced every year when the board met. The loan rate was never reduced, but actually increased monthly. Gary refused to pay the interest demanded and sued for rescission of the contract. The bank attempted to collect from Lewis, a surety under the loan. Does Lewis have to pay? a. Yes, because there is no defense. b. No, because a fraud perpetrated upon Gary will be a defense. c. Yes, since the surety obligation is separate from the underlying contract. d. No, because the surety stands in the shoes of the debtor for all purposes.
B
Margaret has $3,200 cash after selling off her television, stereo, and personal computer. She has debts of $4,800 owing to the following creditors: Anna - $900 Bob's Shop - $1500 Hyatt's - $2100 Jones - $300 If they all agree to a composition, how much will Hyatt's be able to collect? a. $2,100. b. $1,400. c. $700. d. $1,050.
B
Two or more sureties bound for the same debt of a principal debtor are known as: a. absolute sureties. b. cosureties. c. conditional guarantors of collection. d. co-creditors.
B
Under the 2005 Act: a. tax-exempt retirement accounts are included in the bankruptcy estate. b. a debtor's state exemptions are governed by the law of the state where the debtor was domiciled for 730 days immediately before filing. c. homestead exemptions are determined by state laws. d. exempt property cannot be reached for the debtor's obligations, including domestic support obligations.
B
Upon paying the principal debtor's entire obligation, the surety is __________ the rights of the creditor. a. subject to b. subrogated to c. exonerated by d. set off by
B
Voidable preferences include all of the following EXCEPT: a. a transfer of property of the debtor to or for the benefit of a creditor. b. payment of taxes owed to a governmental unit. c. a transfer of property while the debtor was insolvent. d. a transfer that enables a creditor to receive more than he would have received under Chapter 7.
B
Which of the following is both a prejudgment and a postjudgment remedy for a creditor? a. Writ of execution. b. Garnishment. c. Attachment. d. Supplementary proceeding.
B
"Attachment" occurs when a secured party gives value, the debtor has acquired rights in the collateral, and: a. the debtor has completed his obligation to pay. b. the collateral is delivered to the borrower. c. the debtor and secured party have an agreement. d. Both (a) and (b), are correct.
C
A Chapter 13 plan of reorganization may include all but which one of the following? a. Priority debts must be paid in full unless the debtor waives that right. b. Future wages must be controlled by the trustee. c. Assets must be liquidated. d. The rights of unsecured creditors may be modified.
C
A bond, which guarantees the performance of the terms of a contract, is a(n): a. judicial bond. b. official bond. c. performance bond. d. fidelity bond.
C
A defense that can only be asserted by the principal debtor is called a: a. real defense. b. subrogated defense. c. personal defense. d. joint defense.
C
A plan for reorganization under Chapter 11 does not have to meet which of the following requirements to be confirmed by the court? a. Good faith. b. Feasibility. c. Be accepted by all creditors. d. Cash payments for certain classes of creditors.
C
A security interest: a. is an interest only in personal property to secure payment or performance of an obligation. b. is effective against third parties, but not the debtor, when it "attaches." c. may arise in fixtures under UCC Article 9. d. in fixtures, even if perfected, will not have priority over a mortgage in the real property to which the goods are attached.
C
Abe has an allowed claim of $5,000 against the estate of Deborah and has a security interest in her art collection in the amount of $3,000 of the $5,000 claim. a. Abe will recover nothing in the bankruptcy proceeding. b. Abe will recover $5,000 in the bankruptcy proceeding. c. Abe has a secured claim in the amount of $3,000 and an unsecured claim in the amount of $2,000. d. It would be a voidable preference to pay Abe the full $5,000.
C
All of the following are dischargeable in bankruptcy EXCEPT: a. an unsecured note to a bank. b. a car loan. c. domestic support obligations arising from divorce or separation proceedings. d. a court judgment against the debtor.
C
Creditors entitled to priority are paid before: a. the debtor's attorney. b. secured creditors. c. unsecured creditors who file their claims on time. d. All of the above.
C
Edith files a Chapter 7 petition in bankruptcy. She owns the following property: (1) an automobile valued at $1,800; (2) a homestead valued at $75,000, on which First Bank holds a mortgage of $60,000; (3) personal jewelry valued at $1,100; and (4) monthly disability payments of $1,000. Assuming Edith elects to use the exemptions listed in the Bankruptcy Code, what property may Edith keep? a. The disability payments only. b. The disability payments and the homestead only. c. The disability payments plus the automobile, the homestead, and the jewelry. d. Nothing. She must sell all of her assets and have the proceeds distributed to the creditors, and she must turn the disability payments over to the trustee.
C
Monica's husband is an accountant who keeps the books for her business. When it goes bankrupt, will Monica's husband claim for services be allowed by the bankruptcy courts? 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.
C
The right of a surety who has paid the creditor to be repaid by the principal debtor is: a. exoneration. b. subrogation. c. reimbursement. d. None of the above.
C
Under the exemptions found in the federal Bankruptcy Act, which of the following items may the debtor keep? a. A homestead of any value. b. Cash in the bank of $3,000. c. $10,000 per month in payments from a pension plan. d. All of the above are exempt under the federal exemptions. e. Two of the above, (b) and (c).
C
When Mark bought new office furniture on credit, Bartin's Office Supply Co. filed a financing statement. What would be required on the financing statement? a. The trade name of Mark's business. b. Mark's signature. c. Mark's name and an indication of what collateral is covered by the agreement. d. All of the above.
C
Which of the following claims will be paid first from the debtor's estate under Chapter 7? 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.
C
A field warehouse, under Article 9 of the UCC, is: a. one kind of a pledge. b. a common arrangement for financing inventory. c. an agreement that allows the debtor access to the pledged goods and simultaneously gives the secured party control over the pledged property. d. All of the above. e. None of the above.
D
"Value" is defined as including: a. consideration under contract law. b. a binding commitment to extend credit. c. antecedent debt. d. All of the above.
D
A court will not grant a discharge under Chapter 7 to a debtor who: a. has been granted a Chapter 7 or 11 discharge within eight years prior to filing. b. has made false claims to the court. c. has destroyed collateral. d. All of the above.
D
A debtor will be denied a Chapter 7 discharge if he or she has received a Chapter 13 discharge within the past six years: a. unless payments under that Chapter's plan totaled at least 100% of allowed unsecured claims. b. unless payments under Chapter 13 totaled at least 70% of allowed unsecured claims and the plan was the debtor's best effort. c. In all events. d. Both (a) and (b) are alternative exceptions to the six-year rule.
D
A plan of reorganization under Chapter 13 will be confirmed when the: 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.
D
A tangible or electronic record that evidences both a monetary interest and security interest in or a lease of specific goods is known as: a. a negotiable instrument. b. a document of title. c. a promissory note. d. chattel paper.
D
A trustee in bankruptcy may avoid which of the following? a. Fraudulent transfers. b. Voidable preferences. c. Automatic stays. d. Both fraudulent transfers and voidable preferences.
D
All but which one of the following would be exempt from bankruptcy under the federal law? a. $500 received in child support. b. A $300 cocktail ring. c. A $200 cashmere sweater. d. A $10,000 truck.
D
An automatic stay ends: a. upon termination or dismissal of the bankruptcy case. b. upon the debtor's receipt of a discharge. c. only by court order. d. Both (a) and (b).
D
An involuntary bankruptcy petition, even if contested by the debtor, may still result in an "order for relief" if: a. the debtor generally is not paying his admitted debts as they come due. b. the debtor failed to pay three or more debtors whose total debts equal $5,000. c. a custodian was appointed within 120 days before the filing of the petition. d. Both (a) and (c).
D
Bill lends Harvey $500 and the loan is secured by Harvey's furniture. If Bill files a financing statement on January 30, 2008 how long will it be effective? a. Until July 30, 2008. b. Until January 30, 2013. c. Until January 30, 2018, if a continuation statement is filed. d. Both (b) and (c).
D
Bill owns and operates a farm and a farm machinery dealership. Under the Code, a new tractor that Bill uses on his farm is classified as: a. farm products. b. inventory. c. consumer goods. d. equipment.
D
Chapter 3 of the Bankruptcy Code deals with: 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.
D
In March, Margaret made a loan to Pete for $10,000. Three months later, she began to hear rumors about Pete's failing financial condition. When in July, Pete asked her to loan him an additional $2,000 to buy inventory, Margaret required a security interest in the inventory and also demanded that Pete secure the first loan with his personal automobile. In September, Pete filed bankruptcy. Will these security interests stand up? a. Yes, if they are properly filed. b. Yes, since they are for antecedent debts. c. No, both will be voidable preferences. d. No, the security interest in the automobile would be a voidable preference.
D
In the case of Till v. SCS Credit Corporation, the court stated: a. the Bankruptcy Code is clear as to which rate of interest Congress intended when it adopted the cram down provision. b. the courts have no authority to modify the number, timing, or amount of the installment payments from those set forth in the debtor's original contract. c. a court choosing a cram down interest rate needs to consider the creditor's individual circumstances. d. the formula approach to calculating interest has none of the defects discussed in the other three approaches covered in the case.
D
Jill owns and operates a donut shop. Under the Code, the flour, sugar, and other goods used by Jill to make donuts are classified as: a. farm products. b. fixtures. c. consumer goods. d. inventory.
D
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? 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.
D
Non-bankruptcy compromises to give debtors relief while protecting the rights of creditors include: a. compositions. b. non-statutory assignments for the benefit of creditors. c. receiverships under the direction of a court with equity powers. d. All of the above.
D
Once a Chapter 13 plan has been confirmed, it may: a. be modified at the debtor's request but only if the trustee agrees. b. be modified only if all unsecured creditors agree. c. not be modified. d. be modified at the request of the debtor, the trustee, or a holder of an unsecured claim.
D
Subrogation includes: a. creditor's rights against the principal debtor, but not including the creditor's priorities in a bankruptcy proceeding. b. no rights against cosureties. c. no rights against co-makers. d. creditor's rights in security of the principal debtor.
D
The Bankruptcy Code grants to U.S. District Courts: a. original and exclusive jurisdiction over all bankruptcy cases. b. original, but not exclusive, jurisdiction over civil proceedings arising under bankruptcy cases. c. exclusive jurisdiction over all the debtor's property. d. All of the above.
D
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? a. $15,000 b. $13,000 c. $10,500 d. $6,000 e. No money will be available to pay the general unsecured creditors.
D
The types of indispensable paper include: a. chattel paper. b. instruments. c. documents. d. All of the above. e. None of the above.
D
Under Chapter 7, the court will not grant the debtor a discharge if the debtor a. is not an individual. b. has destroyed, concealed, or failed to keep records. c. has transferred, removed, or concealed any of his property with intent to defraud his creditors within 12 months before the filing of the bankruptcy petition. d. All of the above.
D
Under Chapter ___________, certain debts of individuals are not dischargeable despite the debtor's good faith. a. 7 b. 11 c. 13 d. All of the above.
D
What contractual defenses are available to those parties involved in surety relationships? a. The nonexistence of the principal debtor's obligation. b. Discharge of the principal debtor's obligation. c. Modification of the principal debtor's contract. d. All of the above.
D
Which chapter of the Bankruptcy Act allows for the adjustment of debts of an individual with regular income? a. Chapter 7. b. Chapter 11. c. Chapter 12. d. Chapter 13.
D
Which of the following debts are dischargeable in a Chapter 7 bankruptcy proceeding? 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 the above are dischargeable. e. None of the above are dischargeable.
D
Which of the following is a type of collateral involving rights evidenced by indispensable paper? a. A certificated security. b. An uncertificated security. c. A security entitlement. d. All of the above.
D
Which of the following would not be a voidable transfer if made within 90 days of bankruptcy? a. An exchange for new value. b. A consumer's transfer of property valued at $500. c. A payment made in the ordinary course of business. d. None of the above are voidable transfers.
D
Every consensual secured transaction involves: a. a debtor, a secured party, and collateral. b. value and a surety. c. a security agreement and a security interest. d. All of the above. e. Both (a) and (c).
E
Generally, when may a security interest be perfected in collateral? a. By the secured party's filing a financing statement in the designated public office. b. By the secured party's taking or retaining possession of the collateral. c. Automatically, on the attachment of the security interest. d. Temporarily, for a period specified by the Code e. All of the above, depending on the type of collateral.
E
If the principal debtor defaults, the surety has rights against the principal debtor, third parties, and cosureties. These rights would include: a. exoneration. b. reimbursement. c. subrogation. d. contribution. e. All of the above.
E
The court will not allow any claim that: a. is unenforceable against the debtor or her property. b. is for unmatured interest. c. may be offset against a debt owing the debtor. d. is for insider or attorney services in excess of the reasonable value of such services. e. All of the above.
E
United States trustees: a. are government officials appointed by the U.S. Attorney General. b. have administrative responsibilities in bankruptcy cases in almost all of the districts. c. select bankruptcy trustees. d. are the same as bankruptcy trustees. e. Choices (a), (b), and (c) are correct.
E
What are the duties of a trustee under Chapter 7? a. To use, sell, or lease property of the estate and to deposit or invest money of the estate. b. To employ attorneys, accountants, appraisers, or auctioneers and assume or reject any executory contract or unexpired lease of the debtor. c. To rehabilitate the accounts of the debtor. d. (a) and (c), but not (b). e. (a) and (b), but not (c).
E