Bankruptcy Creditors: Rights and Remedies in Bankruptcy

Question 1

In bankruptcy proceedings, what is the primary function of the automatic stay?

Accepted Answer

To halt creditors from taking collection actions against the debtor

Answer

To enable the debtor to sell assets to settle debts

Answer

To prioritize creditors over other claims

Question 2

How does the automatic stay in bankruptcy protect both debtors and creditors?

Accepted Answer

It prevents creditors from pursuing collection efforts, safeguarding debtors from harassment, and gives creditors time to organize and submit their claims.

Answer

It allows debtors to sell their assets and pay off all creditors in full.

Answer

It forces creditors to negotiate with the debtor outside of bankruptcy court.

Question 3

Which of the following is NOT considered a secured claim in bankruptcy?

Accepted Answer

Administrative expense claim

Answer

Mortgage on real property

Answer

Security interest in personal property

Answer

Lien on inventory

Question 4

What is the priority level of an administrative expense claim in bankruptcy?

Accepted Answer

First

Answer

Second

Answer

Third

Answer

Fourth

Question 5

Which of the following is an effect of a bankruptcy discharge on a creditor's rights?

Accepted Answer

Extinguishes the debt obligation

Answer

Restores the debt obligation after bankruptcy

Answer

Converts the debt into a secured claim

Answer

Grants the creditor an automatic stay against the debtor

Question 6

What is the primary purpose of a Chapter 13 bankruptcy filing?

Accepted Answer

To reorganize the debtor's debts and create a repayment plan

Answer

To liquidate the debtor's assets and distribute proceeds to creditors

Answer

To obtain an immediate discharge of all debts

Answer

To pause foreclosure proceedings indefinitely

Question 7

What is the primary effect of an automatic stay in bankruptcy?

Accepted Answer

Prevents creditors from initiating or continuing collection actions

Answer

Grants the debtor exclusive possession and use of their property

Answer

Extends the time period for filing a proof of claim

Answer

Discharges all debts owed to creditors

Question 8

Which type of claim is NOT entitled to priority in bankruptcy?

Accepted Answer

General unsecured claims

Answer

Administrative expenses

Answer

Wages and benefits owed to employees

Answer

Priority tax claims

Question 9

What is the main purpose of filing a proof of claim in bankruptcy?

Accepted Answer

To assert a claim for payment from the bankruptcy estate

Answer

To object to the debtor's eligibility for bankruptcy

Answer

To file a lawsuit against the debtor

Answer

To obtain an automatic stay against the debtor

Question 10

Which of the following is NOT a requirement for filing a successful Chapter 7 bankruptcy petition?

Accepted Answer

The debtor must have sufficient assets to cover all debts

Answer

The debtor must not have received a discharge in the past 8 years

Answer

The debtor must be insolvent

Answer

The debtor must file a petition with the bankruptcy court

Question 11

What is the primary responsibility of a bankruptcy trustee?

Accepted Answer

To administer the bankruptcy estate

Answer

To represent the debtor in court

Answer

To liquidate the debtor's assets and distribute proceeds to creditors

Answer

To file a reorganization plan with the court

Question 12

In bankruptcy, creditors are paid from the debtor's estate based on a priority system. What is the primary reason for establishing this priority?

Accepted Answer

To distribute the debtor's assets among creditors in a fair and orderly manner.

Answer

To ensure all creditors receive equal treatment, regardless of their claim or status.

Answer

To calculate the total amount of debt owed to creditors.

Answer

To protect unsecured creditors from losing their entire claim to secured creditors.

Question 13

Which of the following is NOT considered a secured claim under bankruptcy law?

Accepted Answer

Priority tax claim

Answer

Mortgage on real property

Answer

Lien on personal property

Answer

Security interest in intellectual property

Question 14

What is the effect of a Chapter 7 bankruptcy discharge on a creditor's unsecured claim?

Accepted Answer

The claim is automatically discharged without further action.

Answer

The claim can be revived if the debtor subsequently acquires assets.

Answer

The claim is discharged only if the creditor files a proof of claim.

Answer

The claim is not discharged unless the creditor consents.

Question 15

What is the main purpose of the "automatic stay" in bankruptcy law?

Accepted Answer

To prevent creditors from taking any action to collect their debts

Answer

To prevent creditors from contacting the debtor

Answer

To prevent the debtor from selling assets

Answer

To prevent the debtor from leaving the country

Question 16

Which of the following is NOT a characteristic or consequence of a Chapter 11 bankruptcy filing?

Accepted Answer

The debtor's debts are automatically discharged

Answer

The debtor remains in possession of its assets

Answer

Creditors can file proofs of claim

Answer

The debtor can propose a plan of reorganization

Question 17

What is the primary consequence of a discharge in bankruptcy for creditors?

Accepted Answer

Creditors can no longer collect on discharged debts.

Answer

Creditors can collect on discharged debts if they file a claim before the deadline.

Answer

Creditors can still collect on discharged debts, but only if the debtor incurred the debt through fraud.

Answer

Creditors have an absolute right to collect on all debts, regardless of a discharge in bankruptcy.

Question 18

What is the priority of claims in a Chapter 7 bankruptcy?

Accepted Answer

Secured claims, administrative expenses, priority unsecured claims, general unsecured claims, equity interests

Answer

Equity interests, unsecured claims, secured claims, administrative expenses

Answer

Unsecured claims, secured claims, administrative expenses, equity interests

Question 19

Which of the following actions is NOT available to a secured creditor in bankruptcy?

Accepted Answer

Repossess collateral without the court's permission

Answer

File a motion to dismiss the bankruptcy

Answer

File a proof of claim

Answer

File a motion for relief from stay

Question 20

What is the effect of a Chapter 11 bankruptcy on unsecured creditors?

Accepted Answer

Their claims can be modified or discharged through a reorganization plan

Answer

Their claims are not affected by the bankruptcy

Answer

Their claims are discharged immediately upon filing

Question 21

Which of the following is a type of priority claim in bankruptcy?

Accepted Answer

Wages and benefits owed to employees

Answer

Medical bills

Answer

Student loans

Answer

Credit card debt

Question 22

What is the purpose of the automatic stay in bankruptcy?

Accepted Answer

To prevent creditors from taking actions to collect on their debts against the debtor and its property

Answer

To allow the debtor to sell assets

Answer

To give the debtor time to file a reorganization plan

Question 23

What is the role of the bankruptcy trustee?

Accepted Answer

To administer the bankruptcy estate and ensure that the bankruptcy process is carried out fairly and efficiently

Answer

To file a reorganization plan

Answer

To represent the creditors

Answer

To represent the debtor

Question 24

Which of the following is a benefit of filing for bankruptcy?

Accepted Answer

Discharge of eligible debts and a fresh start

Answer

Higher income

Answer

Increased credit score

Answer

Improved job prospects

Question 25

What is the key difference between Chapter 7 and Chapter 13 bankruptcy?

Accepted Answer

Chapter 7 liquidates nonexempt assets to pay creditors, while Chapter 13 involves a reorganization plan and repayment of debts over time

Answer

Chapter 7 is for businesses, while Chapter 13 is for individuals.

Answer

Chapter 13 is more expensive than Chapter 7.

Question 26

In a bankruptcy case, which of these debts is considered a priority claim?

Accepted Answer

Taxes owed to the government

Answer

Personal loan

Answer

Mortgage on the debtor's home

Answer

Credit card debt

Question 27

In bankruptcy, which of the following is NOT a type of unsecured claim that receives priority?

Accepted Answer

Breach of contract claims

Answer

Administrative expenses

Answer

Wage claims

Answer

Taxes

Question 28

Which of the following is a right that a secured creditor may exercise in the event of a default by the debtor?

Accepted Answer

Foreclosure

Answer

Rescission

Answer

Replevin

Answer

Subrogation

Question 29

In a Chapter 11 bankruptcy, which of the following is a primary purpose of reorganization?

Accepted Answer

To adjust the debtor's debts and continue its business operation

Answer

To liquidate the debtor's assets and distribute the proceeds to creditors

Answer

To punish the debtor for financial mismanagement

Question 30

In a Chapter 7 bankruptcy, which of the following is an example of a general unsecured creditor?

Accepted Answer

A credit card company

Answer

A student loan company

Answer

A car loan company

Answer

A mortgage lender

Question 31

Which of the following is a factor that may affect the priority of a claim in a bankruptcy proceeding?

Accepted Answer

The timing of the claim relative to the bankruptcy filing date

Answer

The amount of the debt

Answer

The relationship between the creditor and the debtor

Answer

The age of the debtor

Question 32

In a Chapter 13 bankruptcy, which of the following is a requirement for a plan to be confirmed?

Accepted Answer

It must be accepted by the Bankruptcy Court and all classes of impaired creditors

Answer

It must be accepted by all creditors

Answer

It must be accepted by the debtor only

Question 33

Which of the following is a potential benefit of filing for bankruptcy?

Accepted Answer

Discharge of eligible debts

Answer

Improved employment opportunities

Answer

Increased credit score

Answer

Tax relief

Question 34

Which of the following is a potential consequence of filing for bankruptcy?

Accepted Answer

Loss of nonexempt property

Answer

Financial independence

Answer

Automatic employment

Answer

Improved health

Question 35

Which type of creditor receives the highest priority in bankruptcy?

Accepted Answer

Administrative expense claimant

Answer

Unsecured creditor

Answer

Secured creditor

Question 36

Which of the following is a remedy available to an unsecured creditor in bankruptcy?

Accepted Answer

Filing a proof of claim

Answer

Levying on the debtor's property

Answer

Foreclosing on collateral

Answer

Obtaining a judgment against the debtor

Question 37

What is the primary objective of a Chapter 13 reorganization plan?

Accepted Answer

To allow the debtor to repay creditors over time and discharge any remaining debt after the plan is completed

Answer

To liquidate the debtor's assets and distribute the proceeds to creditors

Question 38

Which of the following is NOT a type of priority unsecured claim in bankruptcy?

Accepted Answer

Unsecured claim

Answer

Domestic support obligation

Answer

Tax claim

Answer

Employee wage claim

Question 39

Which of the following actions can a creditor take to challenge a claim that has been filed in a bankruptcy case?

Accepted Answer

File an objection with the bankruptcy court

Answer

Ignore the claim

Answer

File a lawsuit against the debtor

Answer

Contact the debtor directly

Question 40

What is the primary goal of a Chapter 11 reorganization bankruptcy?

Accepted Answer

To allow a business to continue operating while it reorganizes its debts and finances

Answer

To liquidate a business and distribute the proceeds to creditors

Answer

To discharge all of a business's debts without any repayment

Question 41

Which of the following may be a benefit of bankruptcy for a debtor?

Accepted Answer

Discharge of debts

Answer

Increased income

Answer

Improved credit score

Answer

Guaranteed job security

Question 42

Which of the following is NOT a characteristic of a secured claim in bankruptcy?

Accepted Answer

It is subordinate to unsecured claims.

Answer

It is supported by collateral.

Answer

It may be foreclosed upon in the event of default.

Answer

It receives priority over general unsecured claims.

Question 43

In a Chapter 7 bankruptcy, which type of claim is given the highest priority?

Accepted Answer

Administrative expenses

Answer

Equity holders

Answer

Unsecured creditors

Answer

Secured creditors

Question 44

What is the primary purpose of an automatic stay in bankruptcy?

Accepted Answer

To prevent creditors from collecting debts owed by the debtor for a period to allow for reorganization.

Answer

To appoint a bankruptcy trustee.

Answer

To allow the debtor to continue operating its business without interference from creditors.

Answer

To discharge the debtor's debts.

Question 45

What is the fundamental distinction between a secured claim and an unsecured claim in bankruptcy?

Accepted Answer

A secured claim is backed by collateral, while an unsecured claim is not.

Answer

A secured claim is entitled to priority over an unsecured claim.

Answer

There is no difference between a secured claim and an unsecured claim.

Answer

An unsecured claim is discharged in bankruptcy first.

Question 46

Which of the following is NOT a type of bankruptcy discharge?

Accepted Answer

Partial discharge

Answer

Chapter 13 discharge

Answer

Chapter 7 discharge

Answer

Chapter 11 discharge

Question 47

What is the primary role of the bankruptcy court?

Accepted Answer

To administer the bankruptcy estate and protect the rights of creditors and debtors.

Answer

To provide legal advice to debtors.

Answer

To determine the validity of claims.

Answer

To prosecute bankruptcy fraud.

Question 48

Which of the following is a potential benefit of filing for bankruptcy?

Accepted Answer

It can provide a fresh start for debtors by discharging eligible debts.

Answer

It can guarantee the debtor a new job.

Answer

It can eliminate all of the debtor's debts, regardless of their nature.

Answer

It can increase the debtor's credit score.

Question 49

What is the key difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?

Accepted Answer

Chapter 7 is a liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy.

Answer

Chapter 7 is available to individuals only, while Chapter 13 is available to both individuals and businesses.

Answer

There is no fundamental difference between Chapter 7 and Chapter 13 bankruptcy.

Answer

Chapter 13 requires that the debtor repay all of their debts, while Chapter 7 does not.

Question 50

A creditor who has a security interest in a debtor's equipment files a claim in the bankruptcy proceeding. How is this claim classified?

Accepted Answer

Secured claim

Answer

Priority claim

Answer

Unsecured claim

Question 51

In a bankruptcy proceeding, which type of creditor typically has a priority claim, meaning they are paid before other unsecured creditors?

Accepted Answer

Employee wages

Answer

Automobile loan provider

Answer

Credit card company

Answer

Mortgage lender

Question 52

What is the primary goal of a Chapter 7 bankruptcy proceeding?

Accepted Answer

Liquidation of the debtor's assets to pay creditors.

Answer

Debt consolidation and restructuring.

Answer

Reorganization of the debtor's business.

Question 53

In a Chapter 11 bankruptcy case, a creditor with an unsecured claim receives a plan proposing a 50% payment over five years. What options does the creditor have?

Accepted Answer

The creditor can accept the plan, reject the plan, or vote to modify the plan.

Answer

Immediately file a lawsuit against the debtor.

Answer

Demand full payment of the claim.

Question 54

A creditor with a secured claim obtains relief from the automatic stay in a bankruptcy case. What does this mean for the creditor?

Accepted Answer

The creditor can proceed with enforcing their security interest in the debtor's assets.

Answer

The creditor must wait until the bankruptcy case is closed.

Answer

The creditor's claim is discharged.

Question 55

Before a debtor files for bankruptcy, what action can a creditor take to potentially strengthen their position?

Accepted Answer

Perfect a security interest in the debtor's assets.

Answer

File a lawsuit against the debtor for breach of contract.

Answer

Demand full payment of the debt.

Question 56

What is the primary role of the bankruptcy court in distributing assets to creditors?

Accepted Answer

The court oversees the distribution process and ensures creditors are treated fairly.

Answer

The court dictates the exact percentage each creditor will receive.

Answer

The court negotiates repayment plans between creditors and the debtor.

Question 57

A creditor's claim is deemed non-dischargeable in bankruptcy. What does this mean for the creditor's ability to collect on the debt?

Accepted Answer

The creditor can still pursue collection efforts against the debtor, even after bankruptcy.

Answer

The creditor's claim is automatically paid in full.

Answer

The creditor is required to accept a plan proposed by the debtor.

Question 58

What effect does a bankruptcy filing have on a creditor's ability to pursue legal action against the debtor?

Accepted Answer

The automatic stay generally prevents most legal actions against the debtor.

Answer

The creditor can immediately continue with any existing legal actions.

Answer

The creditor must wait until the bankruptcy case is closed.

Question 59

A debtor files for bankruptcy, and a creditor has a claim that exceeds the value of the debtor's assets. How is this creditor classified?

Accepted Answer

Undersecured creditor

Answer

Oversecured creditor

Answer

Priority creditor

Answer

Unsecured creditor