Q&A Hero

Q: The disclosure statement must be approved by the court before there can be a vote by creditors on the reorganization plan.

Q: The creditors' committee holds a hearing on the confirmation of the reorganization plan after which the debtor is discharged from any debts that arose before the date of confirmation.

Q: Under the Fishing Business Debt Adjustment Act, the reorganizational plan of the debtor must make certain that all priority claims, such as taxes and bankruptcy costs, are paid in full.

Q: When a debtor files for bankruptcy under the Fishing Business Debt Adjustment Act, it does not automatically create a stay on the collection of most debts.

Q: When a voluntary or involuntary petition is filed under Chapter 7 of the Bankruptcy Code, an automatic stay goes into effect prohibiting the creditors from collecting debts on amounts owed for back taxes, family support, and student loans.

Q: In the priority list that indicates which categories of debts are paid first, administrative expenses incurred during the administration of bankruptcy are paid before secured debts.

Q: Bankruptcy exemptions are uniform across all states.

Q: In bankruptcy, the proceeds of life insurance policies that have yet to mature are subject to creditors' claims.

Q: Under the Bankruptcy Code, states are allowed to use exemptions created by the state legislature rather than the federal exemptions.

Q: Bankruptcy petitions are filed in state district courts that are within the federal court structure.

Q: Creditors may be able to force debtors such as farmers, into involuntary bankruptcy if the debtor fails to pay bills generally as they become due

Q: In an involuntary bankruptcy filing, the petition itself becomes the order for relief and is effective the moment it is filed with the court.

Q: An order for relief is the court's command that the liquidation begin.

Q: The Bankruptcy Code allows debtors to keep a maximum of $18,450 in equity in the debtor's place of residence.

Q: Judy's Print Shop has filed for a Chapter 11 bankruptcy and Judy wonders if her creditors, with whom she has had an increasingly abrasive relationship, will have any say in her reorganization plan. Discuss the role of the creditors in Chapter 11-reorganization.

Q: Barnaby is a farmer who receives two-thirds of his total income from the sale of oranges. After two consecutive years of early frosts that destroyed his orange harvest, Barnaby found himself deep in debt. Seventy percent of his debt resulted from farm expenses. Can he file for Chapter 12 bankruptcy? Why or why not?

Q: Tom has filed for a Chapter 13 bankruptcy and one of his creditors is attempting to organize the other creditors into a group to petition the bankruptcy judge to allow them to prepare a debt readjustment plan for Tom. Will the bankruptcy judge allow this action by creditors?

Q: Under the first federal bankruptcy law in the United States that was enacted in 1800, only creditors could begin a bankruptcy proceeding and only merchants could qualify as debtors.

Q: Permanent bankruptcy legislation was enacted in the United States in 1800.

Q: People who are able to make a down payment and have a steady income may become eligible for a mortgage loan as soon as two years following a discharge in bankruptcy.

Q: Josh, a college student, has been told by his friends that filing for bankruptcy after graduation will discharge all his student loans. Discuss if this is correct.

Q: Overwhelmed by his debt, Jaime decided that he would file for Chapter 7 bankruptcy the following month. Fifteen days before he filed, Jaime took out a $3,000 cash advance on one of his credit cards, and used the money to purchase and install a hot tub in his bathroom. Jaime believed that he would be able to discharge the debt for the hot tub when he went through the bankruptcy proceeding. Was he correct in his belief? Why or why not?

Q: Morgan and Flynn owned a partnership business that was facing financial difficulties. The debts of the business were getting out of hand. However, neither Morgan nor Flynn wanted to close down the business and felt that, with a few changes, they could turn the business around and make a profit. Which chapter of the Bankruptcy Code should they file under? Why?

Q: Fritz is a professional painter and owns a truck worth $10,000 and tools worth $3000. He owns a very modest house worth $17,000. He has numerous unsecured debts totaling $500,000 and considers filing for bankruptcy. Discuss the bankruptcy alternatives for Fritz.

Q: Stan has debt problems. He has unpaid alimony and child support payments. Big Bank is threatening to repossess his car because he is behind on his payments, and a variety of creditors are threatening to sue. He wants to discharge most of his debts and begin with a clean slate. Discuss what action will help Stan's situation.

Q: Joan's bankruptcy proceeding consists of the following debts: back taxes of $10,000, credit card debt of $25,000, home utility bills of $300, and a $10,000 car loan. Also there are bankruptcy administrative expenses of $1000. Discuss the order in which these debts will be settled.

Q: Vernon owns a family run farming business. He earned $100,000 in the current financial year. He owes $70,000, which forms a part of his farm expenses, to creditors but he wants to keep the business running. Which type bankruptcy should Vernon file for? A. Chapter 7 only B. Chapter 11 and chapter 7 C. Chapter 7 and Chapter 12 D. Chapter 12

Q: According to Chapter 13 of the Bankruptcy Code, which of the following statements is correct? A. Involuntary filings are permitted. B. Debtor should be able to pay entire amount they owe to each creditor. C. Debtor must have an already established steady income. D. Corporations and partnerships can file.

Q: The maximum time period that is allowed for Chapter 13 debtors to complete the payment plan is _____ years. A. eight B. ten C. five D. twelve

Q: Which of the following can take advantage of Chapter 13 provisions? A. Self-employed people B. Corporations C. Partnerships D. Educational institutions

Q: Under the Individual Debt AdjustmentChapter 13, Bankruptcy Code a debtor must begin payments within a period of: A. three days. B. thirteen days. C. thirty days. D. thirty-three days.

Q: Under chapter 13 of the Bankruptcy Code what happens if the debtor submits the repayment plan to the court and the court has yet to hold its hearing? A. The debtor is not required to start payments within the stipulated period of thirty days. B. The debtor pays the trustee. C. The debtor makes payments individually to the creditors. D. The debts of the debtor are discharged.

Q: Trudy has a steady income but is behind on her payment of debts. Trudy wants to pay her debts, but needs some relief from her creditors. Discuss what type of Bankruptcy Procedure would best fit her case.

Q: In a _____ a qualified debtor creates a plan that alters the repayment schedule. A. firm offer B. requirements contract C. reorganization D. contract for sale

Q: Sear Enterprises wants to continue in business but needs some relief from creditors' claims. Sear Enterprises should consider filing under _____ of the Bankruptcy Code. A. Chapter 7 B. Chapter 11 C. Chapter 12 D. Chapter 13

Q: A debtor who continues to run a business and performs most of the functions that a trustee performs in other types of bankruptcy is called a(n): A. debtor in bankruptcy. B. debtor in possession. C. unimpaired debtor. D. suspended debtor.

Q: The only individuals specifically excluded from filing under Chapter 11 are ____. A. commodity brokers and stockbrokers B. chartered accountants. C. lawyers and judges. D. real estate developers.

Q: The _____ filed for the reorganization plan must be approved by the court before there can be a vote by creditors on the reorganization plan. A. disclosure statement B. confirmation C. presentment D. shelter provision

Q: Stan commits securities fraud and takes $5,000,000 from a variety of investors. Stan is convicted of a crime and then sued by the investors. Stan files for bankruptcy. What relief will the bankruptcy filing grant Stan? A. Automatic stay on all cash advances paid to a creditor under an open-ended credit plan. B. Automatic stay and discharge of any debt created with the securities fraud. C. Automatic stay but no discharge of any debt created by the securities fraud. D. Automatic stay and discharge of all debts incurred.

Q: Suri purchased a new laptop for $2,500 from Gadget World. To pay for it, she borrowed money from ATS Finance, which took a security interest in the laptop by entering into a security agreement with Suri. How will the security interest be perfected in this case?

Q: Friendly Furniture Co. wants to repossess a sofa in Ed's living room, but Ed refuses to allow the repossession crew into his house. Discuss what options Friendly has.

Q: Joseph owes $15,000 to Carmel Enterprises, $8,500 to Vulcan Co., $11,000 to David and $11,500 to Sigma Enterprises. He has not been making payments on these debts for the past 20 months. Which of these creditors can force Joseph into involuntary bankruptcy? A. Carmel Enterprises only B. Carmel Enterprises and David only C. Carmel Enterprises, Sigma Enterprises, David, and Vulcan Co. D. Sigma Enterprises, David and Vulcan Co. only

Q: The court vests the responsibility of liquidating the assets of the debtor for the benefit of all interested parties in the: A. debtor in possession. B. creditor in possession. C. case trustee. D. primary trustee.

Q: A self-operating postponement of collection proceedings against the debtor, which goes into effect the moment the order for relief occurs is a(n): A. federal exemption. B. involuntary petition. C. automatic stay. D. means test.

Q: Which chapter of the bankruptcy codes allows federal homestead exemption? A. Chapter 11 B. Chapter 7 C. Chapter 13 D. Chapter 12

Q: Which of the following is a duty vested in a trustee by the court, when the debtor is a business? A. He may be authorized to operate the business for a limited period of time. B. He may be authorized to make payments made by the debtor within 90 days before the filing of the petition. C. He may be authorized to sell the debtor's properties and handover the proceeds of the sales to the debtor. D. He may be authorized to pay off the debts according to the personal priority list.

Q: Iko purchased a house through Stockholm Bank Pvt. Ltd. A year later, Iko wanted to make improvements on the mortgaged property and borrowed money from Jeremy, mortgaging the same property again. Jeremy is unaware of the mortgage of the house by Stockholm Bank and records the mortgage. Analyze the situation in case Iko is unable to repay both the mortgagees.

Q: The Raymonds financed the purchase of their house through Reed Bank, a local bank with branches in Houston, where the Raymonds lived. The family made their mortgage payments punctually each month at the nearby branch. However, without prior warning, Reed Bank assigned the mortgage to Stanley Savings Bank located in Washington. Discuss the rights of Reed Bank in making this assignment and if the Raymonds can avoid the inconvenience of dealing with Stanley Savings Bank.

Q: Hayley loans David $20,000 by taking a mortgage on David's land on February 1st, but does not record a mortgage. On April 1, Gavin loans David $15,000 taking a mortgage on the same land and records the mortgage on April 4th. Hayley then records her mortgage on April 8. Discuss the proceedings in case David is unable to pay either of the lenders.

Q: Rae's mortgage payment check is received a day late by Big Bank. Big Bank refuses the check and accelerates the mortgage debt. Rae is unable to pay this demand and Big Bank brings action to foreclose the mortgage. Discuss what defenses, if any, Rae has to the foreclosure action.

Q: Brianna is purchasing an apartment building from Austin that already has a $500,000 mortgage on it. Brianna is uncertain if she can make money on this purchase and certainly does not want the responsibility of paying the mortgage. Discuss how Brianna might structure this purchase to avoid responsibility for the preexisting mortgage.

Q: Daly and Leva entered into an agreement whereby Leva borrowed $15,000 from Daly, and Daly took a security interest in Leva's next corn harvest. The financing statement identified Daly and Leva by name and included their mailing addresses. Leva signed the statement. Can the security interest, in this case, be perfected by the financing statement filed?

Q: Which of the following is true of the UCC provisions which resolve priorities and claims of secured and unsecured parties? A. An attached security interest in inventory has priority over a conflicting security interest in the same inventory. B. Buyers of consumer goods are affected by perfected security interests of which they have no knowledge. C. Security interests in the seller's inventory prevail over buyers of goods in the ordinary course of business (except farm products). D. Conflicting security interests rank according to priority in time of filing or perfection.

Q: Morey purchased a house for $150,000, paying $15,000 in cash and giving a mortgage to a bank for the balance. When Morey defaulted on the loan, the bank foreclosed and sold the house for $25,000 less than Morey owed. Morey believed he no longer owed the bank any money. Discuss the case.

Q: Holly bought a house for $200,000. She put down $40,000 in cash, and took out a $160,000 loan from the Midland Bank to cover the rest of the cost. However, Holly found that she could not make her mortgage payments. Midland Bank foreclosed the mortgage, sold the house for $150,000, and told Holly that she was liable for the $10,000 difference between what she paid for it and what the bank sold it for. Did Midland act within its rights? Explain.

Q: Attachment occurs when the: A. secured party does not sign a security agreement. B. debtor has no ownership rights in the collateral. C. secured party transfers something of value to the debtor. D. secured party gives possession of the collateral.

Q: Security interests on fixtures are perfected by: A. filing a financing statement with the registry of deeds where the land is located. B. making a note of the lien on the certificate of title issued by the state government. C. attachment alone. D. possession of the collateral.

Q: A _____ is that which deliberately misstates the qualifications of a borrower to push a loan through the approval process. A. NINJA loan B. liar loan C. subprime loan D. home equity loan

Q: The _____ was established by the Department of the Treasury to support the efforts of homeowners who, though in default, wished to continue to make payments on their mortgages. A. Consumer Protection Act B. Dodd-Frank Act C. Troubled Asset Relief Program D. Home Affordable Modification Program

Q: A security interest is said to be perfected: A. when the secured party has done everything that the law requires to give the secured party greater rights to the goods than others have. B. when the secured party has a legally enforceable right to take that property and sell it to satisfy the debt. C. when the buyer takes the property subject to a mortgage and the seller agrees to continue paying the debt. D. when the goods are sold but regained as soon as the debtor takes possession of the new property.

Q: A written agreement which identifies the goods and is signed by the debtor is called a: A. subordination agreement. B. security agreement. C. consumer loan agreement. D. registration rights agreement.

Q: A provision in the security agreement that the security interest of the creditor also applies to goods the debtor acquires at a later time is known as a(n): A. forbearance. B. attachment. C. floating lien. D. acceleration.

Q: In which type of mortgage is the loan repaid when the borrower dies or the property is sold? A. Variable-Rate Mortgage B. Conventional Mortgage C. Balloon-Payment Mortgage D. Reverse Mortgage

Q: Under a ____, the mortgagor conveys his or her interest in the property to a disinterested third party, known as a trustee. A. security agreement B. mortgage C. deed of trust D. subordination agreement

Q: Which of the following is true of recording a mortgage? A. A failure to record the first mortgage would remove the obligation of the mortgagor to the first mortgagee. B. The second mortgagee must know about the first mortgage and is exempted to record the mortgage. C. If the mortgage is not recorded and a later mortgage is given on the same property, the old mortgage is superior to the second. D. Recording a mortgage notifies any third party that the mortgagee has an interest in the real property covered by the mortgage.

Q: Which of the following is true of equity of redemption? A. It is the right to pay off the mortgage in full, including interest, and thus discharge the debt in total. B. It states that a default on one installment payment will make the entire balance due immediately, giving the mortgagee the right to collect the full amount. C. It is the mortgagee's right to apply to a court to have the property sold. D. It is the right to receive each installment payment as it falls due.

Q: If the mortgagor has defaulted or has failed to perform some other agreement in the mortgage, the mortgagee has the right to apply to a court to have the property sold. This right is called ____. A. acceleration B. foreclosure C. perfection D. attachment

Q: An acceleration of the debt: A. increases the interest rate. B. makes the entire amount of the debt due for immediate payment. C. increases the monthly payment amount. D. makes the repayment period of the entire debt one year.

Q: If a bunch of mortgages are bundled together and sold as bonds like pension funds, the process is known as ___. A. redemption B. foreclosure C. acceleration D. securitization

Q: Charles sold a house to Darla with Charles holding a recorded mortgage. Darla wants to sell the house and her purchaser, Cindi, obtains a financing commitment from Small Bank, provided Small Bank is able to hold a first mortgage on the house. How will Small Bank obtain the first mortgage? A. By paying off Darla's mortgage. B. Small Bank mortgages take priority over private mortgages. C. Charles may give oral consent that Small Bank will have priority. D. By paying off Charles' mortgage.

Q: Iris is looking for a short-term mortgage that will allow her to pay fixed payments at a relatively low fixed interest rate during the life of the mortgage and one large payment at the end of the term. What kind of mortgage should Iris take? A. A balloon-payment mortgage B. A VA mortgage C. A conventional mortgage D. A graduated-payment mortgage

Q: After repossessing the goods, the secured party (the creditor) may sell them at a public auction or private sale.

Q: A(n) _____ is a transfer of an interest in property for the purpose of creating a security for a debt. A. mortgage B. secured loan C. security interest D. unsecured loan

Q: A point is a one-time charge equal to: A. one-tenth of the principal amount borrowed. B. three percent of the principal amount borrowed. C. one percent of the principal amount borrowed. D. ten percent of the principal amount borrowed.

Q: Which of the following is true of conventional fixed-rate mortgage? A. It has a rate of interest that changes according to fluctuations in the index to which it is tied. B. It involves no government backing by either insurance or guarantee. C. It has a fixed interest rate during the life of the mortgage, where the monthly payments by mortgagor increase over the term of the loan. D. It has comparatively low fixed payments during the life of the mortgage, followed by one large final payment.

Q: A security agreement can either be oral or in writing.

Q: Daisy attempts to put up Harry's property for a loan without Harry's knowledge or consent. There may be attachment but not perfection.

Q: A furniture store that puts up its inventory as collateral for a loan will grant the lender a floating lien.

Q: Maria should examine the certificate of title of a car that she plans to purchase to see if any liens are on the title.

Q: A secured party who has possession of the collateral must take reasonable care of the property.