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Q:
An agent must use reasonable diligence and skill in acting on behalf of his or her principal.
Q:
A principal owes his or her agent a duty to act in good faith.
Q:
An agent owes his or her principal a duty to act in good faith.
Q:
A principal may deny the existence of an agency relationship whenever it suits his or her purpose.
Q:
There does not need to be a written agreement between two parties to create an agency relationship.
Q:
A minor can be an agent.
Q:
An agency relationship can be formed only in writing.
Q:
An agent whose employer does not have the right to control the agent's performance is an independent contractor.
Q:
Building contractors and subcontractors are not independent contractors.
Q:
An independent contractor's physical conduct is controlled, or subject to control, by his or her employer.
Q:
Agency relationships do not exist outside employment relationships.
Q:
All employment laws apply to independent contractors.
Q:
An employee may act in the capacity of an agent.
Q:
An officer of a corporation cannot possess the power to bind the corporation.
Q:
An agency relationship is a fiduciary relationship.
Q:
Peoples Savings & Loan is a savings and loan corporation. Quality Retail Store is a sole proprietorship. Smith & Thomas is a marketing firm organized as a partnership. United Associates, Inc., is a professional corporation. Which of these is eligible to file for reorganization under Chapter 11 of the Bankruptcy Code?
Q:
Alpha Corporation orders office equipment from Best Products, Inc., which has an unperfected security interest in the equipment until it is paid for. Meanwhile, Alpha takes out a loan from Capital Credit, Inc., subject to a security interest in Alpha's building and equipment, which Capital perfects. Alpha files a bankruptcy petition under Chapter 7. If the petition is granted, in what order will Alpha's creditors be paid?
Q:
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.
Q:
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.
Q:
Cody is the sole proprietor of Diners Cafe, which owes debts in an amount more than Cody believes he and Diners can repay. The creditors agree that liquidating the business would not be in their best interests. To stay in business, Cody could file for bankruptcy under
a. Chapter 7 only.
b. Chapter 11 only.
c. Chapter 13 only.
d. Chapter 11 or 13.
Q:
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.
Q:
Greg is a debtor. All-Mart Stores Corporation, Financial Loans, Inc., Master Credit Company, and the federal government are Greg's creditors. For these parties, a bankruptcy proceeding under Chapter 13 could be initiated by
a. the filing of a voluntary petition by Greg only.
b. the filing of an involuntary petition by Greg's creditors only.
c. the filing of a petition by Greg or his creditors.
d. none of the above.
Q:
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.
Q:
Edie 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.
Q:
Roy, the owner of Standard Business Company (SBC), sells SBC to Tim for a note payable to Roy for $100,000. Tim does not pay the note and files for bankruptcy under Chapter 7. The debt represented by the note is
b. dischargeable if $100,000 now seems to be a high price for SBC.
d. dischargeable under any circumstances.
a. not dischargeable if Tim concealed assets to defraud Roy.
c. not dischargeable under any circumstances.
Q:
Fred conceals assets from his bankruptcy proceeding with the intent to defraud his creditors. When this is discovered, the court may
a. only deny a discharge.
b. only distribute Fred's assets to his creditors.
c. only order that Fred remain liable for the unpaid portions of the creditors' claims.
d. deny a discharge, distribute Fred's assets to his creditors, and order that Fred remain liable for the unpaid portions of the creditors' claims.
Q:
Gem Jewelers files a voluntary petition for bankruptcy. In listing its assets, Gem intentionally does not include 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.
Q:
Fact Pattern 30-1
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.
Refer to Fact Pattern 30-1. The claimant with the highest priority is
a. Kay and Music, Inc.
b. Kay only.
c. Lora only.
d. Music, Inc., only.
Q:
Fact Pattern 30-1
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.
Refer to Fact Pattern 30-1. 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.
Q:
On May 1, Ace Credit Company loans Bob $10,000 and perfects a security interest in the car that Bob buys with the money. Bob files for bankruptcy on May 12. The trustee of Bob's estate in bankruptcy may invalidate Ace's security interest
a. only if Bob did not file for bankruptcy with the intent to defraud Ace.
b. only if, on May 1, Ace suspected Bob would soon file for bankruptcy.
c. under any circumstances.
d. under no circumstances.
Q:
Thirty-one days before filing a petition in bankruptcy, Dee transfers property and makes payments that favor one creditor over another. These are
a. affirmation agreements.
b. preferences.
c. secured interests.
d. unsecured debts.
Q:
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.
Q:
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.
Q:
Donna 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.
Q:
Bob lived in his sister's guest house for $200 per month. His other monthly expenses were $800. His monthly income was $1,750. During a two-week period, he charged $10,000 on credit cards. Bob filed a Chapter 7 petition in a federal bankruptcy court. Based on the decision in Case 30.1, In re Lamanna, in deciding whether to accept the Chapter 7 petition or force a Chapter 13 repayment plan, the court in this case would most likely rule in favor of
a. Chapter 7, if Bob could prove that he was forced to move to his own apartment, which would leave him with no disposable income.
b. Chapter 13, because individuals cannot file under Chapter 7.
c. Chapter 7, if Bob's income and living situation were going to remain the same.
d. Chapter 13, if Bob did not have any disposable income.
Q:
Beth files a petition for bankruptcy. Beth must include with the petition
a. a list of her creditors and the amount of the debt owed to each only.
b. a list of her creditors and the amount of the debt owed to each, a list of her property, and a statement of her financial affairs.
c. a list of her property only.
d a statement of her financial affairs only.
Q:
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.
Q:
The Bankruptcy Code's cram-down provision permits a court to confirm a reorganization plan even if only one class of creditors accepts the plan.
Q:
When a business debtor files for Chapter 11 protection, the debtor is allowed to continue in business.
Q:
If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors, the debtor is liable for the difference.
Q:
A discharge in bankruptcy will prevent a debtor from ever obtaining another discharge in bankruptcy.
Q:
A discharge in bankruptcy will prevent a debtor from obtaining another discharge in bankruptcy for two years.
Q:
All student loans are dischargeable in bankruptcy.
Q:
A discharge granted to a debtor in a bankruptcy proceeding discharges all of the debtor's debts.
Q:
It is possible, on a debtor's bankruptcy, that an unsecured creditor might receive nothing to cover a debt.
Q:
Unsecured parties have priority over secured parties to the proceeds from the disposition of collateral on the distribution of a debtor's estate.
Q:
A debtor is permitted to transfer property or make a payment that gives a preference one creditor over another.
Q:
With some exceptions, state law determines the amount of a debtor's property that is exempt from distribution on bankruptcy.
Q:
From property subject to distribution on bankruptcy, a debtor is entitled to exempt all of the equity in his or her house.
Q:
If a creditor willfully violates an automatic stay in a bankruptcy proceeding, an injured party is entitled to actual damages but not punitive damages.
Q:
If an involuntary bankruptcy proceeding is initiated in bad faith, then a court may award damages for injuries caused to the debtor's reputation.
Q:
A debtor must be insolvent to file a petition for bankruptcy.
Q:
Before filing for bankruptcy, a consumer-debtor must receive information about credit counseling.
Q:
Any debtor who is liable on a claim held by a creditor may file for bankruptcy.
Q:
Bankruptcy proceedings are held in state bankruptcy courts.
Q:
Bankruptcy law has one goalto give a debtor's a "fresh start."
Q:
To challenge a ruling in a bankruptcy proceeding, a party must appeal to the highest state court in the state in which the bankruptcy court is located.
Q:
Jim is a farmer. His debts are 90 percent farm-related. They total $1 million, and Jim believes that bankruptcy is the only alternative for discharging them. Jim does not want to lose the farm, however, and most of his creditors agree that liquidation would not be in their best interest. Under what chapter of the bankruptcy laws can Jim retain the farm and the creditors have some of the debt repaid?
Q:
Digital Services, Inc., needs funds to meet its payroll, to make other current operating expenses, and to pay its creditors. Earl, Digital's only shareholder, loans the company $10,000 and accepts a promissory note signed on behalf of Digital by Fran, the firm's accountant. Digital's financial problems continue, however, and the firm's creditors file an involuntary petition to force it into bankruptcy. Is Earl entitled to repayment of his loan to Digital? If so, what is the priority of his claim?
Q:
Gus files a petition for bankruptcy under Chapter 13. Gus 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.
Q:
Pat files for bankruptcy under Chapter 13. The value of the property to be distributed under the plan is more than the amount of the creditors' claims. The court must refuse to approve the plan on the objection of
a. an unsecured creditor only.
b. an unsecured creditor or the trustee.
c. neither an unsecured creditor nor the trustee.
d. the trustee only.
Q:
A petition for a discharge in bankruptcy under Chapter 13 may be filed by
a. Gabe, the sole proprietor of Hometown Net Services, only.
b. Internet Service Providers, a partnership, and Java Web Services, Inc., a corporation, only.
c. Gabe, Internet, and Java.
d. not Gabe, Internet, or Java.
Q:
Tony believes that he needs to obtain a Chapter 13 discharge in bankruptcy. A Chapter 13 bankruptcy proceeding can be initiated by a filing of a petition by
a. a creditor only.
b. a creditor or a debtor only.
c. a debtor only.
d. a trustee only.
Q:
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.
Q:
A petition for a discharge in bankruptcy under Chapter 11 may be filed by
a. Greg, the sole proprietor of Hasty Delivery Service, only.
b. Interstate Carrier, a partnership, and Jiffy Railroad Corporation only.
c. Greg, Interstate Carrier, and Jiffy Railroad.
d. not Greg, Interstate Carrier, or Jiffy Railroad.
Q:
AAA 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. AAA'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.
Q:
Pam, the owner of Quality Corporation (QC), sells QC to Rita. Later, Rita files a suit against Pam for fraud in the deal. Pam signs a note payable to Rita for $50,000, and Rita agrees to release Pam from further claims, except for "obligations under the note." Pam does not pay the note and files for bankruptcy under Chapter 7. According to the decision in Case 30.3, Archer v. Warner, the $50,000 debt in this case is
a. dischargeable to the extent that its payment would not constitute "substantial abuse" by Pam.
b. dischargeable to the extent that its payment would work "substantial hardship" on Pam.
c. entirely dischargeable.
d. not dischargeable.
Q:
Jack files a bankruptcy petition under Chapter 7. Among his debts are support owed to his ex-wife Kay, money borrowed from Loans, Inc., to pay taxes, and amounts representing student loans owed to Mega University. Debts most likely to be discharged include claims for
a. back taxes accruing within three years before a bankruptcy filing.
b. certain fines and penalties payable to the government.
c. domestic support.
d. student loans if their payment imposes undue hardship on the debtor.
Q:
Fact Pattern 30-2
Reliable 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.Refer to Fact Pattern 30-2. If Reliable perfects its security interest before Standard files for bankruptcy, then Reliable will be a secured creditor and the trustee of Standard's estate can
a. invalidate Reliable's interest only after Reliable perfects it.
b. invalidate Reliable's interest only if the firm knew of the impending bankruptcy.
c. invalidate Reliable's interest under any circumstances.
d. not invalidate Reliable's interest.
Q:
Fact Pattern 30-2
Reliable 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.Refer to Fact Pattern 30-2. If Reliable does not perfect its security interest before Standard files for bankruptcy, then Reliable will be an unsecured creditor and the trustee of Standard's estate can
a. invalidate Reliable's interest only before Reliable perfects it.
b. invalidate Reliable's interest only if the firm knew of the impending bankruptcy.
c. invalidate Reliable's interest under any circumstances.
d. not invalidate Reliable's interest.
Q:
Sally files for bankruptcy. On behalf of Sally's estate, a trustee could reclaim Sally's recent payment of
a. last month's phone bill.
b. the previous two months' utility bills.
c. a year-old restaurant tab.
d. back taxes.
Q:
Fact Pattern 30-1
Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7.
Refer to Fact Pattern 30-1. 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.
Q:
Fact Pattern 30-1
Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7.
Refer to Fact Pattern 30-1. 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.
Q:
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.
Q:
Pete's Pizza declares bankruptcy, idling Pete's delivery vehicles. A creditor with a secured interest in the vehicles can compel Pete's to pay a certain amount of money each month to offset the depreciation in the value of the vehicles. This is
a. the mirror image rule.
b. the adequate protection doctrine.
c. the creditor safeguard rule.
d. the avoidance doctrine.
Q:
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.
Q:
Phil's voluntary petition for bankruptcy is found to be proper. The order for relief is effective as soon as
a. Phil files the petition.
b. Phil posts a bond to cover the costs of the proceedings.
c. Phil's creditors agree to the terms.
d. the trustee collects and distributes the property of Phil's estate.
Q:
In Case 30.1, In re Lamanna, the court held that it is a "substantial abuse" of the Bankruptcy Code for a debtor seeking bankruptcy protection to
a. fail to disclose all of the debtor's assets to the bankruptcy court.
b. have the debtor's debts discharged under Chapter 7 when the debtor has the resources to repay his or her creditors within a reasonable period of time under Chapter 13.
c. submit a plan for bankruptcy protection that treats creditors unequally.
d. have the debtor's debts discharged under Chapter 13 when the debtor has the resources to repay his or her creditors within a reasonable period of time under Chapter 7.
Q:
A petition for a discharge in bankruptcy under Chapter 7 may be filed by
a. First Savings & Loan Association, a corporation.
b. Holly, an investment adviser.
c. Interstate Insurance Company, a corporation.
d. Regional Employees Credit Union, a corporation.
Q:
Filing a plan under Chapter 13 can be less expensive and less complicated than filing under Chapter 7 or Chapter 11.