Chapter 38. Bankruptcy
1. Federal district courts may hear all matters collateral to the bankruptcy, even if these matters are not normally
permitted to be brought in federal court.
a. True
b. False
2. Within each federal district court is established a bankruptcy court staffed by bankruptcy judges.
a. True
b. False
3. One creditor of a debtor may file a bankruptcy petition as long as the debtor owes him more than $5,000 in
unsecured claims.
a. True
b. False
4. An automatic stay will prevent a creditor from creating a lien against the debtor‘s property.
a. True
b. False
5. A trustee in bankruptcy may sell the property of the debtor’s estate.
a. True
b. False
6. Barb loaned Mark $500, which Mark agreed to repay on January 15, 2011. If Mark filed a voluntary petition of
bankruptcy on August 1, 2010, Barb had a claim as a creditor.
a. True
b. False
7. The doctrine of subordination of claims might result in two unsecured creditors getting unequal proportions of their
debts paid.
a. True
b. False
8. Any debtors may seek relief under Chapter 7 of the Bankruptcy Code.
a. True
b. False
9. For bankruptcy purposes, insolvency means that debts are greater than assets.
a. True
b. False
10. A fraudulent transfer made on or within two years prior to filing a petition for bankruptcy can be avoided by the
trustee.
a. True
b. False
11. Chapter 5 involves liquidation, whereas Chapters 7, 11, 12, and 13 involve reorganization and adjustment of debts.
a. True
b. False
12. In a Chapter 7 proceeding, an unsecured creditor who files a claim with the court after the deadline because he is
too busy planning and going on a vacation would be totally unable to collect.
a. True
b. False
13. The debtor alone decides upon the reorganization plan in Chapter 11 proceedings.
a. True
b. False
14. The court will order the appointment of a trustee in a Chapter 11 proceeding only for cause or if the appointment is
in the interests of creditors or equity security holders.
a. True
b. False
15. A debtor may not file a plan at any time in a Chapter 11 reorganization.
a. True
b. False
16. The court has the sole right to accept or reject a Chapter 11 plan of reorganization.
a. True
b. False
17. An assignment for the benefit of creditors requires the creditors’ consent
a. True
b. False
18. Once a Chapter 13 plan of reorganization is confirmed, the provisions are binding on the debtor and all of his
creditors.
a. True
b. False
19. After reorganization, all debts are forgiven.
a. True
b. False
20. In a Chapter 13 proceeding, only the debtor may submit a plan of reorganization.
a. True
b. False
21. A lien must be satisfied before the property is available to satisfy the claims of unsecured creditors.
a. True
b. False
22. Garnishment is one form of pre-judgment remedy.
a. True
b. False
23. A writ of execution is issued after a judgment against the debtor is entered in court.
a. True
b. False
24. Garnishment cannot be ordered prior to a judgment‘s being entered.
a. True
b. False
25. A composition would bind to the settlement all of debtor’s creditors.
a. True
b. False
26. In an assignment for the benefit of creditors, if each creditor is paid an equal share of his original obligation, the
debtor is then discharged from any further obligation to the creditor.
a. True
b. False
27. A receiver is a disinterested person who collects and preserves the debtor’s assets and income and disposes of them
at the direction of the court which appointed the receiver.
a. True
b. False
28. Most student loans cannot be discharged under Chapter 13.
a. True
b. False
29. Under exemptions in the Bankruptcy Code, a debtor may keep both $22,975 in equity in a residence and up to $3,675
in equity in a motor vehicle.
a. True
b. False
30. Chapter 12 of the Bankruptcy Code applies to individuals or couples engaged in farming if 50 percent of their gross
income is from farming and aggregate debts do not exceed $1 million.
a. True
b. False
31. A composition of creditors is a bankruptcy form of relief under Chapter 13 of the Bankruptcy Code.
a. True
b. False
32. Donald has a $10,000 judgment against him for a debt owed to a creditor. If Donald files for bankruptcy and
receives a discharge from the bankruptcy court, he will no longer be obligated to pay the judgment.
a. True
b. False
33. A debtor who files for bankruptcy can keep up to $1,550 in jewelry and all social security, veteran’s, and disability
benefits under the exemptions found in the Bankruptcy Code.
a. True
b. False
34. A debtor has the option of using either federal or state exemptions; however, the 2005 Act imposes limits on the use
of a state homestead exemption to the extent that the homestead was obtained through fraudulent conversion of
nonexempt assets at any time before filing the bankruptcy petition.
a. True
b. False
35. A trustee under a Chapter 11 or 13 proceeding performs the same duties as a Chapter 7 trustee.
a. True
b. False
36. After secured creditors in a Chapter 7 liquidation proceeding have been satisfied and there is enough money left to
pay some, but not all other creditors, the claims of the same rank share the money on a pro rata basis.
a. True
b. False
37. Stephens, an employee of bankrupt ABC Company, would be able to receive her $2,000 in unpaid wages earned
within 90 days before ABC’s filing of the bankruptcy petition and $2,000 in contributions to her employee benefit
plans, for a total of $4,000 before any money is paid to Ramsdell, a consumer, to compensate him for a deposit paid
to the company for goods which were never delivered because of the company’s going bankrupt.
a. True
b. False
38. While certain debts of an individual are not dischargeable under Chapters 7, 11, and 12, all debts are dischargeable
under Chapter 13‘s “hardship discharge” provisions.
a. True
b. False
39. The estate of a debtor includes wages earned after commencement of a Chapter 7 liquidation proceeding.
a. True
b. False
40. In a Chapter 13 proceeding, the bankruptcy estate of an individual includes wages earned after commencement of
the proceeding.
a. True
b. False
41. Commencing a voluntary case by filing a petition constitutes an automatic order for relief.
a. True
b. False
42. A debtor may not receive a discharge under Chapter 7 if he or she received a Chapter 13 discharge within the past
six years in most cases.
a. True
b. False
43. No private employer may terminate the employment of or discriminate with respect to employment against an
individual solely because he is or has been a debtor under the Bankruptcy Code.
a. True
b. False
44. About half of all bankruptcy petitions are involuntary petitions.
a. True
b. False
45. A statutory lien arises solely by force of statute and includes a security interest or judicial lien.
a. True
b. False
46. 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 fairly divide the assets among creditors
d. To allow rehabilitation of debtors
47. An involuntary petition for bankruptcy can be filed with respect to a:
a. nonprofit charitable organization.
b. partnership that invests in real estate.
c. life insurance company.
d. wheat farmer.
48. Duties of a trustee in a case under Chapter 11 include all but which of the following?
a. To examine all proofs of claims
b. To provide the court with financial reports of the debtor’s business operations
c. To investigate the financial condition of the debtor
d. To file a list of creditors
49. Kent 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 Kent’s status? He has:
a. a secured claim for $4,500.
b. an unsecured claim for $8,000.
c. an unsecured claim for $4,500.
d. a secured claim for $8,000.
50. 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 car
51. Which of the following debts would be discharged in bankruptcy?
a. A consumer credit loan for a stove
b. Property taxes on a beach house
c. Student loans
d. Alimony payments past due
52. 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 for 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
53. 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