Bankruptcy Law Developments: Stay Up-to-Date with Current Issues

Question 1

In determining the eligibility of a Chapter 13 debtor for a discharge, which of the following factors is NOT taken into consideration by courts?

Accepted Answer

The length of time the debtor has been in business

Answer

The debtor's disposable income

Answer

The total amount of the debtor's unsecured debts

Answer

The likelihood of the debtor being able to repay their debts

Question 2

Which of the following is considered a secured debt?

Accepted Answer

A car loan secured by the car

Answer

A credit card balance

Answer

A personal loan

Answer

A utility bill

Question 3

Which of the following is NOT a typically protected exemption in bankruptcy?

Accepted Answer

Luxury vehicles

Answer

Homestead exemption

Answer

Retirement savings

Answer

Personal belongings

Question 4

Which recent development in bankruptcy law has made Chapter 13 bankruptcy more accessible to debtors with higher incomes?

Accepted Answer

The Small Business Reorganization Act of 2019

Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Answer

The Bipartisan Balanced Budget Act of 1997

Answer

The Bankruptcy Code of 1978

Question 5

In a case involving a secured creditor, what is the purpose of the concept of 'adequate protection'?

Accepted Answer

To require the debtor to provide sufficient alternative security to the creditor

Answer

To ensure the creditor receives interest payments on the debt

Answer

To allow the debtor to retain possession of the collateral

Answer

To appoint a trustee to oversee the case

Question 6

What is the primary objective of the Bankruptcy Code's 'fresh start' provision?

Accepted Answer

To give debtors a second chance to rebuild their financial lives

Answer

To maximize the recovery of assets for creditors

Answer

To punish debtors for their financial mismanagement

Answer

To discourage individuals from filing for bankruptcy

Question 7

Under what circumstances may a bankruptcy court consider granting a debtor a hardship discharge?

Accepted Answer

When the debtor's income falls below the poverty level

Answer

When the debtor has made significant efforts to repay creditors

Answer

When the debtor has committed fraud or other misconduct

Answer

When the debtor's debts are primarily student loans

Question 8

What is the primary role of the bankruptcy trustee in a Chapter 7 liquidation case?

Accepted Answer

To administer the debtor's estate and distribute assets to creditors

Answer

To represent the debtor in negotiations with creditors

Answer

To determine the debtor's eligibility for bankruptcy

Answer

To provide counseling and financial education to the debtor

Question 9

What is the main purpose of a 'reaffirmation agreement' in bankruptcy?

Accepted Answer

To confirm that the debtor will continue to be legally obligated to pay a specific debt despite discharging it in bankruptcy

Answer

To discharge the debtor's obligation to pay a secured debt

Answer

To modify the terms of a secured debt

Answer

To allow the debtor to sell collateral securing a debt

Question 10

What is the significance of the 'means test' in Chapter 7 bankruptcy?

Accepted Answer

It determines whether a debtor is eligible to file for Chapter 7 bankruptcy based on their income and assets

Answer

It calculates the amount of debt that a debtor can discharge in Chapter 13 bankruptcy

Answer

It assesses the debtor's ability to repay their debts under a Chapter 11 plan

Answer

It evaluates the debtor's financial situation to determine if they have engaged in fraudulent activities

Question 11

Compare the key characteristics of Chapter 7 and Chapter 13 bankruptcy for individuals.

Accepted Answer

Chapter 7: Liquidation; quick discharge without a repayment plan, but potential loss of assets

Accepted Answer

Chapter 13: Reorganization; repayment plan with potential to keep assets, but longer discharge period and higher costs

Answer

Chapter 11: Liquidation with Chapter 13 repayment plan, typically used by businesses and not available to individuals

Answer

Chapter 7: Reorganization without a repayment plan, allowing individuals to keep their assets and quickly discharge debts

Question 12

Which of the following is NOT a core principle underlying the Bankruptcy Code?

Accepted Answer

Punishing debtors for their financial mismanagement

Answer

Providing debtors with a fresh start

Answer

Ensuring fair treatment of creditors

Answer

Promoting economic efficiency

Question 13

In a Chapter 11 reorganization, what is the primary responsibility of the debtor-in-possession?

Accepted Answer

To manage the debtor's assets and operations

Answer

To negotiate with creditors on a plan of reorganization

Answer

To file a petition for bankruptcy

Answer

To represent the interests of secured creditors

Question 14

What is the primary purpose of a Chapter 13 bankruptcy?

Accepted Answer

To allow the debtor to create a plan to repay creditors over a period of time, typically 3 to 5 years

Answer

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

Answer

To discharge all of the debtor's debts

Answer

To convert the case to Chapter 11

Question 15

Which type of creditor does NOT hold a secured claim?

Accepted Answer

Credit card issuer

Answer

Mortgage lender

Answer

Auto loan lender

Answer

Landlord with a security deposit

Question 16

What is the purpose of the automatic stay in bankruptcy?

Accepted Answer

Halt creditor collection efforts

Answer

Facilitate debtor financial reorganization

Answer

Discharge debtor obligations

Answer

Convert the case to a different bankruptcy chapter

Question 17

In a Chapter 13 bankruptcy, what is a primary objective of the reorganization plan?

Accepted Answer

Proposal of a repayment plan within a 3 to 5-year timeframe

Answer

Liquidation of debtor assets for creditor distribution

Answer

Complete discharge of all debtor debts

Answer

Provision of a fresh start by eliminating all financial obligations

Question 18

What is the main purpose of the means test in Chapter 7 bankruptcy?

Accepted Answer

Determine debtor eligibility for Chapter 7

Answer

Calculate dischargeable debt amount

Answer

Prevent bankruptcy system misuse

Answer

Ensure equitable asset distribution among creditors

Question 19

What is the primary objective of the Bankruptcy Code?

Accepted Answer

Provide rehabilitation and a fresh start for debtors

Answer

Maximize creditor recovery

Answer

Ensure fair and equitable asset distribution

Answer

Punish debtors for financial misconduct

Question 20

Which of the following is a ground for involuntary bankruptcy?

Accepted Answer

The debtor is generally not paying its debts as they become due

Answer

The debtor is a sole proprietorship

Answer

The debtor has not transferred or concealed property with the intent to hinder, delay, or defraud creditors

Answer

The debtor is not insolvent

Question 21

How do emerging technologies like blockchain and cryptocurrency affect bankruptcy proceedings? Consider the challenges and opportunities they pose for debtors, creditors, and bankruptcy professionals.

Accepted Answer

Blockchain and cryptocurrency could make it harder for creditors to recover debts by providing debtors with new ways to hide assets.

Accepted Answer

Blockchain and cryptocurrency could lower costs and speed up bankruptcy proceedings by automating many tasks.

Accepted Answer

Bankruptcy courts and professionals are still hesitant to fully embrace blockchain and cryptocurrency.

Answer

Blockchain and cryptocurrency have no bearing on bankruptcy proceedings.

Question 22

Which of the following factors is considered in determining whether a Chapter 13 plan is feasible?

Accepted Answer

The debtor's projected income

Answer

The debtor's age

Answer

The debtor's hobbies

Answer

The debtor's marital status

Question 23

In a Chapter 11 case, what is the role of the Committee of Unsecured Creditors?

Accepted Answer

To represent the interests of unsecured creditors and negotiate a plan of reorganization

Answer

To approve or disapprove the bankruptcy petition

Answer

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

Question 24

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

Accepted Answer

To prevent creditors from taking action to collect debts owed by the debtor

Answer

To discharge the debtor's debts

Answer

To distribute the debtor's assets to creditors

Question 25

What is the primary role of the bankruptcy trustee in a Chapter 7 case?

Accepted Answer

To administer the debtor's estate and liquidate assets to pay creditors

Answer

To negotiate a reorganization plan with creditors

Answer

To represent the debtor in court

Question 26

Which of the following is a characteristic of a Chapter 13 bankruptcy?

Accepted Answer

The debtor retains possession of their assets and makes regular payments to creditors

Answer

Unsecured debts are discharged in full

Answer

The debtor's business is reorganized under the supervision of a bankruptcy judge

Question 27

What is the purpose of a reaffirmation agreement in bankruptcy?

Accepted Answer

To reestablish a debt that was discharged in bankruptcy without affecting the discharge of other debts

Answer

To modify the terms of a debt that was not discharged in bankruptcy

Question 28

Which of the following is a ground for denying a discharge in bankruptcy?

Accepted Answer

The debtor transferred property with the intent to hinder, delay, or defraud creditors

Answer

The debtor has a high annual income

Answer

The debtor has a history of filing for bankruptcy multiple times

Question 29

What is the purpose of the means test in Chapter 13?

Accepted Answer

To determine eligibility for bankruptcy relief based on income and expenses

Answer

To set the length of the repayment plan

Answer

To calculate the amount of debt that can be discharged

Answer

To prioritize creditors

Question 30

What is the primary role of the bankruptcy trustee?

Accepted Answer

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

Answer

To represent the debtor

Answer

To determine the dischargeability of debts

Answer

To negotiate with creditors

Question 31

What is the purpose of the automatic stay in bankruptcy?

Accepted Answer

To provide the debtor with an opportunity to reorganize their finances without creditor interference

Answer

To create a reorganization plan

Answer

To discharge debts

Answer

To transfer assets to the bankruptcy estate

Question 32

Which of the following statements about the goals of the Bankruptcy Code is incorrect?

Accepted Answer

To prioritize creditor recovery over other objectives

Answer

To facilitate business reorganization

Answer

To provide a fresh start for debtors

Answer

To protect secured creditors

Question 33

In the Chapter 11 bankruptcy process, how is a plan of reorganization approved?

Accepted Answer

Creditors vote on the plan, and it is confirmed by the bankruptcy court if it meets certain criteria

Answer

The plan is automatically confirmed after a certain period of time

Answer

The bankruptcy court approves the plan without creditor input

Answer

The plan is confirmed if the debtor can pay all creditors in full

Question 34

Under recent Bankruptcy Code changes, how does a Chapter 13 discharge affect a debtor's debts?

Accepted Answer

It eliminates all dischargeable debts, including unsecured debts, after the Chapter 13 plan is completed.

Answer

It eliminates only secured debts, leaving the debtor responsible for unsecured debts.

Answer

It eliminates only unsecured debts, leaving the debtor responsible for secured debts.

Question 35

What is the term used to describe the modification of a secured creditor's claim in a bankruptcy reorganization plan?

Accepted Answer

Cramdown

Answer

Reaffirmation

Answer

Liquidation

Answer

Discharge

Question 36

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

Accepted Answer

To prevent creditors from taking collection actions against the debtor

Answer

To allow the debtor to liquidate assets and distribute proceeds to creditors

Answer

To discharge all debts owed by the debtor

Question 37

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

Accepted Answer

Loss of certain assets due to liquidation or surrender

Answer

Enhanced employment opportunities

Answer

Increased income and improved financial stability

Answer

Improved credit score

Question 38

What is the significance of a reaffirmation agreement in bankruptcy?

Accepted Answer

It allows the debtor to voluntarily assume liability for a debt that would otherwise be discharged in bankruptcy

Answer

It automatically discharges all debts owed by the debtor

Answer

It prevents the creditor from taking collection actions against the debtor

Question 39

**What is the primary legal effect of a discharge in bankruptcy under Chapter 7?**

Accepted Answer

It releases the debtor from personal liability for dischargeable debts.

Answer

It prevents the debtor from filing for bankruptcy again for a certain period of time.

Answer

It restores the debtor's credit score to its pre-bankruptcy level.

Answer

It voids any liens or security interests held by creditors on the debtor's property.

Question 40

**The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was primarily enacted to:**

Accepted Answer

Restrict eligibility for Chapter 7 bankruptcy and promote the use of Chapter 13 bankruptcy.

Answer

Reduce the stigma associated with bankruptcy

Answer

Streamline the bankruptcy process and reduce administrative costs

Answer

Increase the availability of credit for bankruptcy filers

Question 41

**The "means test" in bankruptcy law primarily serves to:**

Accepted Answer

Determine a debtor's eligibility for Chapter 7 bankruptcy based on their income and assets.

Answer

Distribute assets fairly among creditors based on their priority

Answer

Identify fraudulent or abusive bankruptcy filings

Answer

Calculate the amount of debt that can be discharged in a Chapter 13 bankruptcy

Question 42

**Which of the following assets is typically NOT protected from creditors in a bankruptcy proceeding?**

Accepted Answer

Luxury vehicle

Answer

Retirement savings accounts, such as 401(k) plans

Answer

Primary residence up to a certain value

Answer

Clothing and essential household items

Question 43

**The automatic stay in bankruptcy law:**

Accepted Answer

Temporarily halts collection efforts by creditors and protects the debtor's property.

Answer

Prevents the debtor from selling or transferring any of their assets

Answer

Gives the debtor an unlimited amount of time to repay their debts

Answer

Automatically discharges all unsecured debts without any further action

Question 44

**Which of the following is a common factor that can contribute to personal bankruptcy?**

Accepted Answer

Loss of employment

Answer

Skilled financial planning

Answer

Winning a substantial lottery prize

Answer

Excessive inheritance

Question 45

**The concept of "fresh start" in bankruptcy law refers to:**

Accepted Answer

The opportunity for debtors to rebuild their financial lives after bankruptcy by discharging eligible debts.

Answer

An automatic restoration of the debtor's credit score and financial reputation

Answer

A guarantee that the debtor will never be able to file for bankruptcy again

Answer

The complete elimination of all financial obligations, regardless of their dischargeability

Question 46

What is a potential drawback of filing for bankruptcy?

Accepted Answer

A significant decrease in your credit score.

Answer

Complete elimination of all debts.

Answer

A substantial increase in financial stability.

Answer

Improved job prospects.

Question 47

The Bankruptcy Code in the United States is:

Accepted Answer

The primary federal law governing bankruptcy procedures.

Answer

A set of state laws that vary from one state to another.

Answer

A body of legal principles established through court decisions.

Question 48

The Supreme Court's ruling in *RadLAX Gateway Hotel, LLC v. Amalgamated Bank* significantly impacted the treatment of which group in bankruptcy proceedings?

Accepted Answer

Secured creditors.

Answer

Unsecured creditors.

Answer

Debtors in possession.

Answer

Equity holders (shareholders).

Question 49

What is a key feature of the Small Business Reorganization Act of 2019 (SBRA)?

Accepted Answer

It allows businesses with up to $2,725,625 in debt to use Subchapter V for reorganization.

Answer

It eliminates the means test for Chapter 13 bankruptcy filers.

Answer

It automatically converts businesses with over $10 million in debt to Chapter 11 proceedings.

Question 50

The "absolute priority rule" in bankruptcy dictates that:

Accepted Answer

Senior creditors must be paid in full before junior creditors receive any payment.

Answer

Junior creditors can receive payments before senior creditors if they have a higher priority claim.

Answer

It only applies to Chapter 11 bankruptcy cases.

Question 51

The "fresh start" principle in bankruptcy law aims to:

Accepted Answer

Give debtors the opportunity to rebuild their financial lives after bankruptcy.

Answer

Require debtors to repay all their debts in full.

Answer

Prevent debtors from filing for bankruptcy more than once.

Question 52

Which of the following is a potential advantage of filing for Chapter 11 bankruptcy?

Accepted Answer

Reorganization of debts and assets under the court's supervision.

Answer

Immediate discharge of all debts.

Answer

Complete elimination of future debt liability.

Question 53

The "cramdown" provision in Chapter 11 bankruptcy allows a debtor to:

Accepted Answer

Propose a reorganization plan that modifies the rights of secured creditors.

Answer

Utilize the provision only if they are an individual debtor.

Answer

Force all creditors to approve the reorganization plan.