54. Edith files a Chapter 7 petition in bankruptcy. She owns the following property: (1) an automobile valued at $1,000;
(2) a homestead valued at $75,000, on which First Bank holds a mortgage of $50,000; (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, at least part of the equity in 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.
55. The bankruptcy court may dismiss a:
a. Chapter 7 case, or in a case filed by an individual debtor whose debts are primarily consumer debts, may with
or without the debtor’s consent convert the case to a Chapter 11 or 13 case.
b. Chapter 7 case for cause after notice and a hearing.
c. Chapter 11 case for cause without notice and a hearing.
d. Chapter 13 case under no circumstances.
56. A court will not grant a discharge under Chapter 7 to a debtor who:
a. has been granted a Chapter 7 discharge within eight years prior to filing.
b. has made false claims to the court.
c. has destroyed collateral.
d. is an individual.
57. A court may confirm a Chapter 11 plan of reorganization that is not accepted by all classes of creditors if:
a. the court determines the plan does not discriminate unfairly and the plan is fair and equitable.
b. the plan does not provide for less than the amount the nonaccepting class bargained for.
c. the court determines that it is the only feasible plan, even if it is not accepted by any classes of claims.
d. the plan includes the creditors’ rights in a logical manner.
58. Bankruptcy under Chapter 13 differs from Chapter 11 in that:
a. an individual cannot use Chapter 11.
b. a corporation cannot use Chapter 13.
c. Chapter 11 cannot be instituted by involuntary petition.
d. Chapter 13 requires unsecured debts to be less than $100,000.
59. 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. The trustee must control future wages.
c. Assets must be liquidated.
d. The rights of secured and unsecured creditors may be modified.
60. A plan of reorganization under Chapter 13 will be confirmed when:
a. the debtor has not been discharged before.
b. the unsecured creditors are not discharged.
c. the unsecured creditors receive the same amount as the secured creditors.
d. the unsecured creditors receive at least as much as they would have if the debtor had liquidated.
61. Pre-judgment attachment permits a creditor to seize the debtor‘s property when the defendant:
a. cannot be served with a summons personally.
b. has not paid his debts on time.
c. has filed for bankruptcy.
d. was found guilty of usury.
62. Margaret has $3,200 cash after selling off her television, DVD player, and computer. She has debts of $4,800 owing
to the following creditors:
Anna $900
Bob‘s Shop $1,500
Hyatt’s $2,100
Jones $300
If they all agree to a composition agreement, how much will Hyatt’s be able to collect?
a. $2,100
b. $1,400
c. $700
d. $1,050
63. 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 nonstatutory composition.
b. a statutory assignment.
c. an equity receivership.
d. an automatic stay.
64. Which chapter of the Bankruptcy Code allows for the adjustment of debts of an individual with regular income?
a. Chapter 7
b. Chapter 11
c. Chapter 12
d. Chapter 13
65. The 1994 amendments to the Bankruptcy Code require that the U.S. Judicial Conference adjust for inflation the
dollar amounts of certain provisions of the Code every:
a. three years.
b. five years.
c. six years.
d. eight years.
66. 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. No creditor approval
d. Cash payments
67. All of the following are dischargeable in bankruptcy EXCEPT:
a. an unsecured note to a bank.
b. a car loan.
c. alimony and child support.
d. a court judgment against the debtor.
68. 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 the debtor’s property while the debtor was insolvent.
d. a transfer that enables a creditor to receive more than he would have received under Chapter 7.
69. Able has an allowed claim of $5,000 against the estate of Wallace and has a security interest in his art collection in
the amount of $3,000 of the $5,000 claim. Able:
a. will recover nothing in the bankruptcy proceeding.
b. will recover $5,000 in the bankruptcy proceeding.
c. has a secured claim in the amount of $3,000 and an unsecured claim in the amount of $2,000.
d. has a secured claim in the amount of $5,000.
70. One type of fraudulent transfer consists of the:
a. distribution of the debtor‘s property among creditors.
b. debtor’s transferring of 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.
71. 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
72. 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.
73. Baker goes into bankruptcy owing $5,000 as wages to his employees. There is enough in his estate to pay all costs of
administration and enough to pay his employees, but if the employees are paid, there will be nothing left for the
general creditors. Which of the following is NOT true under the above facts?
a. The Bankruptcy Code provides for priority of wages owed to employees.
b. Secured creditors will be paid to the extent of their security interest before the employees will be paid.
c. The general creditors will not be paid.
d. The general creditors can be paid before the employees if they file a claim with the court.
74. The debtor is presumed to have been insolvent on and during what period of time immediately preceding the date on
which the petition was filed?
a. Thirty days
b. Sixty days
c. Ninety days
d. Six months
75. Non-bankruptcy compromises to give debtors relief while protecting the rights of creditors include all of the following
except:
a. mergers.
b. nonstatutory assignments for the benefit of creditors.
c. receiverships under the direction of a court with equity powers.
d. compositions.
76. 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.
77. Which of the following claims will be paid first from the debtor‘s estate in a Chapter 7 bankruptcy?
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 $4,000 for wages earned within 120 days of the bankruptcy filing
78. 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. Which of the following is true?
a. Able is a lien creditor.
b. A creditor with a security interest that was not perfected when the bankruptcy petition was filed has priority
over Able.
c. The judgment is a preferential transfer that will be invalidated by the trustee.
d. Able will not be able to recover any of the judgment.
79. 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 debtor’s request.
80. Which of the following would be a voidable transfer if made within 90 days of bankruptcy?
a. An exchange for new value.
b. An enabling security interest perfected within 30 days after the debtor receives possession of the property.
c. A payment made in the ordinary course of business.
d. A payment made to or for the benefit of a creditor.
81. Under Chapter , the bankruptcy estate includes wages earned after commencement of the case.
a. 7
b. 11
c. 13
d. 15
82. Under Chapter , certain debts of individuals are not dischargeable despite the debtor’s good faith.
a. 7
b. 11
c. 13
d. 15
83. In bankruptcy law, an insider may be defined as:
a. a limited partner of the debtor.
b. a relative.
c. one with inside information on prospective movement of a company’s position in the marketplace.
d. Both (a) and (b).
84. Chapter 3 of the Bankruptcy Code deals with:
a. the meetings of creditors.
b. proof of claims.
c. priority of claims.
d. debts of farmers
85. Under the Bankruptcy Code’s provisions for proof of claims, a court may not allow any claim that is:
a. unenforceable against the debtor or his property.
b. for matured interest.
c. for reasonable insider fees.
d. unsecured.
86. A transfer of debtor’s property includes:
a. retention of title as a security interest.
b. only a voluntary disposition of property.
c. only a direct interest in property.
d. only modes of disposing of property, or an interest therein, specified in the Bankruptcy Code.
87. When may a trustee not avoid a transfer?
a. When such payment is of a debt incurred in the ordinary course of business or financial affairs of the debtor
and the transferee
b. When such payment is not made in the ordinary course of business or financial affairs of the debtor and
transferee
c. When the transfer is made according to extraordinary business terms
d. When the transfer is made for new value.
88. What is the trustee in bankruptcy and what is the role of the trustee in bankruptcy proceedings? What powers and
duties does the trustee have and what sorts of transactions the trustee can attack?
89. Fritz is seriously considering bankruptcy because he has a large number of outstanding debts, the principal ones of
which are as follows: (1) he owes his ex-wife $25,000 in back alimony and child support; (2) he owes $20,000 in
guaranteed student loans; (3) he has a lawsuit pending against him in which his ex–girlfriend is asking for $50,000 in
damages (the suit is based upon the intentional tort of battery and arises from an incident in which Fritz got mad at
his girlfriend and hit her); and (4) he owes the First Bank $20,000 for the loan securing his new sports car. Should
Fritz file for bankruptcy?
90. Albert recently graduated from college with a degree in business administration, but has been unable to find a job.
He has decided to file a Chapter 7 petition with the Bankruptcy Court. He has the following assets:
a. a $250 ring.
b. $5,000 in equity in a condominium secured by a mortgage.
c. $100 a week in unemployment benefits after being laid off from his previous job.
d. $750 in business administration books, including a barely-used copy of Business Law.
e. a $1,000 retainer for his teeth prescribed by his orthodontist.
f. $1,200 in equity in a new car which he purchased with a loan from the bank.
His debts are as follows:
a. $10,000 in student loans.
b. $20,000 to the bank for his car. The loan is secured by the car.
c. $5,000 in unsecured credit card debts.
What can he keep? What will each of the creditors receive? Explain.
91. Edward‘s Excursions Inc. filed for Chapter 7 bankruptcy. It has $80,000 in equity and has the following debts
outstanding:
$50,000 to Arthur secured by a boat worth $25,000.
$30,000 to Bradley secured by a truck worth $30,000.
$20,000 to Clarence unsecured.
The month before Edward closed and filed for bankruptcy, his employees earned $4,000 but did not get paid.
Edward’s owes $4,000 in back taxes. In the process of administering the estate, the trustee paid $5,000 in attorney
fees. In what order will these claims be paid?
92. Bankruptcy legislation serves a dual purpose. What are these purposes?
93. Section 522 of the Bankruptcy Code exempts specified property of an individual debtor from bankruptcy. What are
some of these exemptions?