331. The final stage of bankruptcy is known as:
a. disruption in bankruptcy
b. removal in bankruptcy
c. distancing of the debtor
d. divorce from the proceedings
e. none of the other choices
332. Bankruptcy discharge is:
a. illegal
b. when a third party steps in to pay the debtor’s debts
c. when creditors forgive all debt
d. the final stage of the bankruptcy proceeding for individuals
e. none of the other choices are correct
333. means that the nonexempt assets are liquidated and the proceeds distributed among the creditors, who may
not ask for more.
a. Bankruptcy finalization
b. Bankruptcy clearance
c. Bankruptcy discharge
d. Bankruptcy extension
e. Bankruptcy declaration
334. To deal with the increasingly international business scene, most countries have moved away from a “grab” theory of
bankruptcy jurisdiction that gave control of assets to whichever bankruptcy court got control first to a(n)
approach.
a. “partial universalism”
b. “real universalism”
c. “modified universalism”
d. “universal grab”
e. “modified specific”
335. Which of the following debts are not extinguished by a Chapter 7 bankruptcy?
a. alimony and child support payments
b. back taxes
c. debts incurred by fraud against creditors
d. fined owed to the government
e. all of the other choices
336. Which of the following debts are not extinguished by a Chapter 7 bankruptcy?
a. debts owed for the purchase of “necessities”
b. alimony
c. debts owed for food purchases
d. all of the other specific choices
e. none of the other choices
337. Alimony and child support payments, back taxes and most student loans are all examples of:
a. debt that is extinguished by bankruptcy
b. debt that is not extinguished by bankruptcy
c. debt that is extinguished by bankruptcy in most states
d. debt that is noted on a credit report for 10 years
e. none of the other choices are correct
338. Once bankruptcy proceedings are finished, the consumer’s credit record:
a. is wiped clean
b. may not mention the first bankruptcy a person has had
c. may note the bankruptcy for three years
d. may note the bankruptcy for ten years
e. must always show that the person went through a bankruptcy
339. Once bankruptcy proceedings are finished, the consumer’s credit record:
a. is wiped clean
b. may not mention the first bankruptcy a person has had
c. may note the bankruptcy for up to seven years
d. may always show that the person went through a bankruptcy
e. none of the other choices
340. Once Chapter 7 bankruptcy is finished, the debtor:
a. will have it on her credit record for up to 7 years
b. will have it on her credit record for life
c. may not file for bankruptcy for another 8 years
d. may not file for bankruptcy for another 10 years
e. none of the other choices
341. Chapter 11 bankruptcies, which are filed by businesses:
a. force the sale of all business assets
b. wipe the slate clean of debts for a business and allow it to continue operating
c. allow a business to keep operating under reorganization of its activities and its debts
d. prohibits the firm from starting any new operations, and it must wind up all old business
e. none of the other choices
342. Chapter 11 bankruptcies, which are filed by businesses:
a. force the sale of all business assets
b. wipe the slate clean of debts for a business and allow it to continue operating
c. make the business property of the state until liquidated
d. prohibits the firm from starting any new operations, and it must wind up all old business
e. none of the other choices
343. Every year approximately businesses use a Chapter 11 bankruptcy.
a. 1 million
b. 500,000
c. 1.5 million
d. 100,000
e. 10,000
344. Every year approximately businesses use a Chapter 11 bankruptcy.
a. 1 million
b. 500,000
c. 1.5 million
d. 100,000
e. none of the other choices are correct
345. The difference between the value of a business as a going concern compared with what is collected from selling
the assets of the company is known as a:
a. going concern surplus
b. final concern surplus
c. bankruptcy surplus
d. potential concern surplus
e. real surplus
346. The difference between the value of a business as a going concern compared with what is collected from selling
the assets of the company is known as a:
a. real surplus
b. final concern surplus
c. bankruptcy surplus
d. potential concern surplus
e. none of the other choices are correct
347. The surplus that the creditors hope to capture by allowing the business to remain in operation so that they have a
greater chance of full repayment is called:
a. going concern surplus
b. final concern surplus
c. bankruptcy surplus
d. potential concern surplus
e. real surplus
348. The surplus that the creditors hope to capture by allowing the business to remain in operation so that they have a
greater chance of full repayment is called:
a. real concern surplus
b. final concern surplus
c. bankruptcy surplus
d. potential concern surplus
e. none of the other choices are correct
349. Most companies that file Chapter 11 bankruptcies have assets worth:
a. more than $1 million
b. less than $1 million
c. more than $1 billion
d. more than $5 billion
e. at least $5 million
350. Most companies that file Chapter 11 bankruptcies have assets worth:
a. more than $1 million
b. at least $5 million
c. more than $1 billion
d. more than $5 billion
e. none of the other choices are correct
351. An advantage of a well-planned Chapter 11 bankruptcy, compared to liquidation, includes:
a. fewer legal fees
b. less success restructuring the bankrupt party
c. many expert witness dilemmas
d. lesser payments to secured creditors
e. none of the other choices
352. In most Chapter 11 bankruptcies, the operates the “reorganized” business.
a. debtor
b. creditor
c. court appointed official
d. impartial third party
e. county agent
353. In most Chapter 11 bankruptcies, the operates the “reorganized” business.
a. county agent
b. creditor
c. court appointed official
d. impartial third party
e. none of the other choices are correct
354. Brandon files for a Chapter 11 bankruptcy on behalf of his company, Brandon’s B-B-Q. The company is allowed to
continue its operations. During this period Brandon is:
a. the debtor in possession
b. the guarantor in extremis
c. a trustee
d. a and b
e. a and c
355. Brandon files for a Chapter 11 bankruptcy on behalf of his company, Brandon’s B-B-Q. The company is allowed to
continue its operations. During this period Brandon is:
a. the official in possession
b. the guarantor in extremis
c. a creditor
d. a and b
e. none of the other choices are correct
356. The powers of a debtor in possession are balanced by:
a. the underwriter in charge
b. the creditor’s committee
c. the lienor’s committee
d. the party of rights
e. the grievance committee
357. The powers of a debtor in possession are balanced by:
a. the underwriter in charge
b. the grievance committee
c. the lienor’s committee
d. the party of rights
e. none of the other choices
358. In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that “critical
vendors” were to be paid first so that the store might stay in business, the appeals court held that the decision of the
bankruptcy judge was:
a. within the scope of judgment allowed in an effort to keep a business functioning
b. proper because the critical vendors were the secured creditors with preference
c. proper so long as the proceeds of future sales were dedicated to non-critical vendors
d. improper because it violated the payment schedule required in the Bankruptcy Code
e. none of the other choices
359. In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that “critical
vendors” were to be paid first so that the store might stay in business, the appeals court held that the decision of the
bankruptcy judge was:
a. within the scope of judgment allowed in an effort to keep a business functioning
b. proper because the critical vendors were the secured creditors with preference
c. proper so long as the proceeds of future sales were dedicated to non-critical vendors
d. improper because of evidence of fraud in dealings by Kmart executives with vendors
e. none of the other choices
360. In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that “critical
vendors” were to be paid first so that the store might stay in business, the appeals court held that:
a. the record showed the prospect or benefit to the other creditors, which is necessary to allow the preferential
payment of one class of creditors and so the critical-vendors order could stand
b. the record did not show the prospect or benefit to the other creditors, which would be necessary to allow the
preferential payment of one class of creditors and so the critical-vendors order could not stand
c. the record did not show the prospect or benefit to the other creditors, which would be necessary to allow the
preferential payment of one class of creditors but the critical-vendors order could stand anyway
d. the record showed the prospect or benefit to the other creditors, which is necessary to allow the preferential
payment of one class of creditors, but the critical-vendors order could not stand due to the special
circumstances of the case
e. the creditors who objected were unreliable and so should not be paid
361. In the Matter of Kmart Corp., where some creditors objected to the bankruptcy judge decision that “critical
vendors” were to be paid first so that the store might stay in business, the appeals court held that the decision of the
bankruptcy judge was:
a. the record showed the prospect or benefit to the other creditors, which is necessary to allow the preferential
payment of one class of creditors and so the critical-vendors order could stand
b. the creditors who objected were unreliable and so should not be paid
c. the record did not show the prospect or benefit to the other creditors, which would be necessary to allow the
preferential payment of one class of creditors but the critical-vendors order could stand anyway
d. the record showed the prospect or benefit to the other creditors, which is necessary to allow the preferential
payment of one class of creditors, but the critical-vendors order could not stand due to the special
circumstances of the case
e. none of the other choices are correct
362. Refer to Fact Pattern 12-1. When Fidelity was deciding whether or not to lend Gena money, which of the following
resources could it have possibly used?
a. a pasta maker’s trade association, if Gena was a member
b. Gena’s financial statements
c. records of her transactions with other banks
d. reports from credit agencies
e. any or all of these
363. Refer to Fact Pattern 12-1. Each month Gena is supposed to pay a set amount of money to Fidelity in repayment of
her loan. This may be described as what type of credit account?
a. a full-collateral account
b. an open account
c. an installment account
d. a retainer account
e. a signatory account
364. Refer to Fact Pattern 12-1. Assume that Gena pledges to Fidelity that if she is unable to meet her monthly
repayment obligations the bank may take her pasta machines. They may be best described as:
a. principal
b. equity
c. leveraged equity
d. collateral
e. a guarantor
365. Refer to Fact Pattern 12-1. Assuming that Gena pledges not only her pasta makers, but also her 1/2 acre piece of
property in Montclair, NJ. Once she defaults on her loan payments to First Fidelity the bank may:
a. start judicial proceedings against her
b. seize all of her property to settle the debt
c. seize her non-exempt property to settle the debt
d. start judicial proceedings against her and seize her non-exempt property to settle the debt
e. the bank cannot do anything until it files its claim with the governor of the state
366. Refer to Fact Pattern 12-1. Suppose that Gena pledges her 1/2 acre piece of property to secure her loan with First
Fidelity. After Gena defaults on her loan, First Fidelity may obtain:
a. a mechanic’s lien on the property
b. a judgment lien on the property
c. a possessory lien on the property
d. a default lien on the property
e. an executory lien on the property
367. Refer to Fact Pattern 12-1. In this case, Marvin is best described as:
a. a surety
b. a principal
c. a trustee
d. a mortgagee
e. an obligor
368. Refer to Fact Pattern 12-1. Assume that once Gena defaults on her loan payments Marvin steps in and makes
those payments for Gena. Once Marvin finishes paying off this debt, he may:
a. seek reimbursement from First Fidelity
b. seek reimbursement from Gena
c. seek exoneration against Gena
d. seek reimbursement from First Fidelity and seek exoneration against Gena
e. seek reimbursement and exoneration from Gena
369. Refer to Fact Pattern 12-1. After Gena defaults on her loan, Fidelity should be able to seize which property to help
settle the debt?
a. Gena‘s prized family-heirloom vase collection
b. all of Gena’s furniture
c. any automobile Gena owns
d. Gena’s home
e. all of the other choices
370. Refer to Fact Pattern 12-1. Given her situation, if her income is above average Gena would likely file for a:
a. Chapter 13 bankruptcy
b. Chapter 9 bankruptcy
c. Chapter 7 bankruptcy
d. designment
e. derogation of duties
371. Refer to Fact Pattern 12-1. Assume that Gena has, besides business debts, student loans. If she is declared
bankrupt by a court, what will happen to these loans? They will:
a. be extinguished
b. be extinguished only if Gena is also paying child support
c. be extinguished only if the IRS agrees
d. not be extinguished
e. be extinguished based on Gena’s good faith
372. In Summers Group v. Tempe Mechanical, Summers (Rexel) sold electrical materials used in a construction
project that went into bankruptcy. Litigation developed over where various claimants stood to collect. The appeals
court held that:
a. Summers had to pay all attorney fees related to the litigation as it filed its lien last
b. Summers was the only lien holder to file properly, so stood first in line to collect
c. Summers would be treated equally with all other lien holders
d. Summers was the last lien holder to file, so stood last in line of the lien holders, but stood in line to collect
before unsecured creditors
e. None of the other answers are correct
373. In Summers Group v. Tempe Mechanical, Summers (Rexel) sold electrical materials used in a construction
project that went into bankruptcy. Litigation developed over where various claimants stood to collect. The
appeals court held that:
a. Summers had to pay all attorney fees related to the litigation as it filed its lien last
b. Summers was the only lien holder to file properly, so stood first in line to collect
c. Summers, as a materials supplier, stood in line to collect behind the electrical firm that actually performed the
electrical work
d. Summers was the last lien holder to file, so stood last in line of the lien holders, but stood in line to collect
before unsecured creditors
e. None of the other answers are correct