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A1. Carlton files a petition in bankruptcy. One of the goals of bankruptcy law with respect to a debtor is to
a. encourage the continued use of credit to borrow funds.
b. ensure that third parties will continue to guarantee loans.
c. provide a fresh start, free from creditors' claims.
d. shield assets from creditors' claims.

c. provide a fresh start, free from creditors' claims.

A2. Mabel files a petition in bankruptcy. The initial proceeding on this petition will be in
a. a federal bankruptcy court.
b. a state bankruptcy court.
c. the highest court in the state in which A is located.
d. the United States Supreme Court.

a. a federal bankruptcy court.

A3. A petition for a discharge in bankruptcy under Chapter 7 may be filed by
a. Employees Credit Union, a corporation.
b. Federal Savings & Loan Association, a corporation.
c. Goodhands Insurance Company, a corporation.
d. Huey, an independent financial adviser.

d. Huey, an independent financial adviser.

A4. Elmo files a petition in bankruptcy. If the court concludes that there are grounds for a finding of "substantial abuse," the court will most likely
a. dismiss Elmo's petition.
b. discharge Elmo's debts.
c. distribute Elmo's property to Elmo's creditors.
d. issue an automatic stay against any actions by Elmo's creditors.

a. dismiss Elmo's petition.

A5. Mia's voluntary petition for bankruptcy is found to be proper. The order for relief is effective as soon as
a. Mia files the petition.
b. Mia posts a bond to cover the costs of the proceedings.
c. Mia's creditors agree to the terms.
d. the trustee collects and distributes the property of Mia's estate.

a. Mia files the petition.

A6. Tasty Pastries declares bankruptcy, idling Tasty's delivery vehicles. A creditor with a secured interest in the vehicles can compel Tasty to pay a certain amount of money each month to offset the depreciation in the value of the vehicles. This is
a. the adequate protection doctrine.
b. the avoidance doctrine.
c. the creditor preference rule.
d. the Tasty Pastries rule.

a. the adequate protection doctrine.

A7. Valley Ranch cannot provide its creditors with adequate protection during the automatic stay. The bankruptcy court is most likely to
a. deny Valley Ranch a discharge.
b. place the affected assets in the hands of a neutral third party.
c. remove the stay and permit the affected assets to be repossessed.
d. sell the affected assets.

c. remove the stay and permit the affected assets to be repossessed.

A8. Don files a petition for bankruptcy. Don's creditors must file with the court their proof of claims against Don's assets within
a. fifteen days of the creditors' meeting.
b. thirty days of the creditors' meeting.
c. sixty days of the creditors' meeting.
d. ninety days of the creditors' meeting.

d. ninety days of the creditors' meeting.

Fact Pattern 30-1A (Questions A9-A10 apply)
Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7.

A9. Refer to Fact Pattern 30-1A. Floyd dies while riding the cycle. Eve is Floyd's only heir. With respect to the bankruptcy estate, the inheritance is
a. exempt property.
b. part of the estate if Floyd died more than 180 days after Eve's filing.
c. part of the estate if Floyd died within 180 days after Eve's filing.
d. part of the estate if the accident was in some way Eve's fault.

A10. Refer to Fact Pattern 30-1A. Regarding the sale of the cycle, the trustee may
a. cancel it as a fraudulent transfer.
b. cancel it as a voidable preference.
c. not cancel it because it is a sale, not a gift.
d. not cancel it, but can sue Floyd's estate for the return of the $1,000.

A9: c. part of the estate if Floyd died within 180 days after Eve's filing.
A10: a. cancel it as a fraudulent transfer.

Fact Pattern 30-2A (Questions A11-A12 apply)
Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a security interest in the equipment that Standard buys with the money and receives on July 1. Standard files for bankruptcy on July 12.

A11. Refer to Fact Pattern 30-2A. If Rely does not perfect its security interest before Standard files for bankruptcy, then Rely will be an unsecured creditor and the trustee of Standard's estate can
a. invalidate Rely's interest only before Rely perfects it.
b. invalidate Rely's interest only if Rely knew of the impending bankruptcy.
c. invalidate Rely's interest under any circumstances.
d. not invalidate Rely's interest.

A12. Refer to Fact Pattern 30-2A. If Rely perfects its security interest before Standard files for bankruptcy, then Rely will be a secured creditor and the trustee of Standard's estate can
a. invalidate Rely's interest only after Reliable perfects it.
b. invalidate Rely's interest only if Rely knew of the impending bankruptcy.
c. invalidate Rely's interest under any circumstances.
d. not invalidate Rely's interest.

A11: c. invalidate Rely's interest under any circumstances.
A12: d. not invalidate Rely's interest.

A13. Kipper files a petition in bankruptcy. Kipper's dischargeable debts include
a. domestic-support obligations.
b. student loans unless the lender would suffer undue hardship.
c. unpaid state and federal taxes.
d. unsecured credit-card debt.

d. unsecured credit-card debt.

A14. Fix-It Auto Repair receives a discharge in bankruptcy, even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy. Fix-It's discharge will
a. neither stop actions nor void judgments regarding overdue debts.
b. only stop actions to collect overdue debts.
c. only void uncollected judgments on overdue debts.
d. stop actions and void judgments regarding overdue debts.

d. stop actions and void judgments regarding overdue debts.

A15. To reorganize debt and continue in business, Sports & Fitness Corporation may file a petition in bankruptcy under the Bankruptcy Code's Chapter
a. 7.
b. 11.
c. 12.
d. 13.

b. 11.

A16. Natural Resources, Inc. (NRI), files for bankruptcy under Chapter 11 and assumes the role of a debtor in possession. In this role, NRI is similar to
a. a creditor at a Chapter 7 creditors' meeting.
b. a family farmer after a discharge under Chapter 12.
c. a secured creditor in possession of collateral under Chapter 13.
d. a trustee in a liquidation proceeding under Chapter 7.

d. a trustee in a liquidation proceeding under Chapter 7.

A17. To adjust debt and institute a repayment plan, Sven—who is not a corporation, a partnership, or a family farmer or fisherman—may file a petition in bankruptcy under the Bankruptcy Code's Chapter
a. 7.
b. 11.
c. 12.
d. 13.

d. 13.

A18. Veda believes that she needs to obtain a Chapter 13 discharge in bankruptcy. A Chapter 13 proceeding can be initiated by a filing of a petition by
a. a creditor.
b. a debtor.
c. anyone.
d. a trustee.

b. a debtor.

A19. Suki files for bankruptcy under Chapter 13. The value of her property to be distributed under the plan is more than the amount of the creditors' claims. The court can approve the plan
a. only if neither an unsecured creditor nor the trustee objects.
b. only if no unsecured creditor objects.
c. only if the trustee does not object.
d. over the objection of either an unsecured creditor or the trustee.

d. over the objection of either an unsecured creditor or the trustee.

A20. Gustav files a petition for bankruptcy under Chapter 13. Gustav is granted a discharge. Debts that will not be discharged include claims for
a. domestic support, fraudulently incurred debt, and student loans.
b. domestic support only.
c. fraudulently incurred debt only.
d. student loans only.

a. domestic support, fraudulently incurred debt, and student loans.

B1. Nero files a petition in bankruptcy. The proceeding is governed by the Bankruptcy Code, which is encompassed by
a. Article 3 of the Uniform Commercial Code.
b. Chapter 5 of the Federal Register.
c. Section 7 of the appropriate state statute.
d. Title 11 of the United States Code.

d. Title 11 of the United States Code.

B2. Lulu joins with other creditors to force Mikhail, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to
a. ensure that creditors will continue to lend to insolvent debtors.
b. protect creditor assets from diminution in value.
c. provide equitable treatment in the competition for debtor assets.
d. make all debtor property available for creditor claims.

c. provide equitable treatment in the competition for debtor assets.

B3. Tina operates a sole proprietorship, a corporation, and a partnership. Tina wants to obtain relief for her individual debts and the debts of her corporation and partnership. Tina may file a petition for each under
a. Chapter 7.
b. Chapter 9.
c. Chapter 11.
d. Chapter 13.

a. Chapter 7.

B4. Kofi files a petition for bankruptcy. Kofi must include with the petition
a. a list of creditors and the amount of the debt owed to each only.
b. a list of creditors and the amount of the debt owed to each, a list of property, and a statement of financial affairs.
c. a list of property only.
d a statement of financial affairs only.

b. a list of creditors and the amount of the debt owed to each, a list of property, and a statement of financial affairs.

B5. Dona goes through an involuntary bankruptcy proceeding. An involuntary bankruptcy occurs when
a. a debtor files forms designated for the purpose in a bankruptcy court.
b. a debtor is unable to pay his or her debts as they come due.
c. a debtor's creditors force the debtor into bankruptcy proceedings.
d. a debtor's debts exceed the fair market value of his or her assets.

c. a debtor's creditors force the debtor into bankruptcy proceedings.

B6. Ollie files a petition in bankruptcy. At the moment of filing
a. an automatic stay goes into effect.
b. Ollie's debts are discharged.
c. Ollie's petition is dismissed.
d. Ollie's property is distributed to Ollie's creditors.

a. an automatic stay goes into effect.

B7. Mac files a petition for a discharge in bankruptcy. Mac's failure to appear at a meeting of the creditors listed in Mac's schedules may result in Mac being
a. denied a discharge of bankruptcy.
b. fined.
c. held in contempt.
d. imprisoned.

a. denied a discharge of bankruptcy.

B8. Elle is a trustee for a federal bankruptcy court. Elle's duties include
a. collecting a debtor's property.
b. establishing priority for the payment of unsecured creditors.
c. operating a debtor's business to obtain maximum profit for creditors.
d. submitting to an examination under oath by the creditors.

a. collecting a debtor's property.

B9. Thirty-one days before filing a petition in bankruptcy, Frida transfers property and makes payments that favor one creditor over another. These are
a. affirmation agreements.
b. preferences.
c. secured interests.
d. unsecured debts.

b. preferences.

Fact Pattern 30-1B (Questions B10-B11 apply)
In January, Jazz Dance Studio owes Kay, its musical director, $1,800 for current wages, receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc., a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files for bankruptcy under Chapter 7.

B10. Refer to Fact Pattern 30-1B. Based on the size of the studio's estate in bankruptcy, each of Jazz's creditors will get only 10 percent of their claims. Regarding the payment to Music, Inc., the trustee may
a. not recover it because Music's claim has priority.
b. not recover it unless Music is an insider.
c. recover it as a fraudulent transfer.
d. recover it as a voidable preference.

B11. Refer to Fact Pattern 30-1B. The highest priority belongs to
a. Kay and Music, Inc.
b. Kay only.
c. Lora only.
d. Music, Inc., only.

B10: d. recover it as a voidable preference.
B11: a. Kay and Music, Inc.

B12. Gem Jewelers files a voluntary petition for bankruptcy. In listing its assets, Gem intentionally omits certain valuable stones. After Gem is granted a discharge, Hasty Catering, one of Gem's unsecured creditors whose claims were discharged, learns of the fraud. Hasty can
a. do nothing.
b. enforce its claim against Gem.
c. file an involuntary petition for bankruptcy against Gem.
d. take possession of the stones with or without a breach of the peace.

b. enforce its claim against Gem

B13. Pola files a petition in bankruptcy. Pola's non-dischargeable debts include
a. domestic-support obligations.
b. student loans if payment would impose undue hardship.
c. unpaid loans to finance home repairs.
d. unsecured credit-card debt.

a. domestic-support obligations.

B14. Eli agrees to pay a debt to Financial Credit, Inc., which is otherwise dischargeable in bankruptcy. This is
a. a justification.
b. a novation.
c. a reaffirmation.
d. a rejection.

c. a reaffirmation.

B15. Micro Corporation's creditors agree to a workout with the firm. This is
a. a Chapter 11 bankruptcy proceeding.
b. an accountant's summary of a debtor's financial situation.
c. a privately negotiated adjustment of creditor-debtor relations.
d. a reorganization of corporate debts and debtors.

c. a privately negotiated adjustment of creditor-debtor relations.

B16. Paula is a debtor. Paula's employer Quality Communications, Inc., her ex-husband Rob, her alma mater State University, and Timely Credit Company are her creditors. For these parties, a repayment plan under
Chapter 13 could be filed by
a. Paula only.
b. Paula, her employer, or her creditors only.
c. Paula or her creditors only.
d. Paula's employer only.

a. Paula only.

B17. To adjust debt and institute a repayment plan, Q.T. Café, a small business, may file a petition in bankruptcy under the Bankruptcy Code's Chapter
a. 7.
b. 11.
c. 12.
d. 13.

d. 13.

B18. Jill believes that she should file a plan for a Chapter 13 discharge in bankruptcy. A Chapter 13 bankruptcy plan must provide for
a. the completion of all payments to all creditors within six years.
b. the payment of 100 percent of all obligations in full.
c. the surrender of all collateral to the creditors.
d. the turnover of the debtor's future income to the trustee.

c. the surrender of all collateral to the creditors.

B19. Owen drops out before he completes his college education and starts his own business. Five years later, Owen files for bankruptcy under Chapter 13. Owen will obtain a discharge of all debts provided for by the Chapter
13 plan if the value of the property distributed under the plan is greater than what would have been available in a liquidation and
a. if he fails to make all payments due to events beyond his control.
b. if he stays in business for at least five years.
c. if he takes out a student loan and returns to school.
d. under no circumstances.

a. if he fails to make all payments due to events beyond his control.

B20. To adjust debt and institute a repayment plan, Rolf, a family farmer, may file a petition in bankruptcy under the Bankruptcy Code's Chapter
a. 1.
b. 3.
c. 5.
d. 12.

d. 12.

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