Question 1

If a party files a Chapter 7 bankruptcy, the trustee may use all of the parties IRA or SEP to satisfy debts.

Accepted Answer

Under U.S. federal law, funds held in an Individual Retirement Account (IRA) or a Simplified Employee Pension (SEP) plan are generally protected from creditors in a Chapter 7 bankruptcy, up to a certain limit. This means the trustee cannot use all of the funds in these accounts to satisfy debts.

Question 2

Liquidation may be voluntary, but not involuntary, under Chapter 7

Accepted Answer

Under Chapter 7, liquidation can be both voluntary, where the debtor chooses to file for bankruptcy, and involuntary, where creditors file a petition against the debtor.

Question 3

It is possible to file for Chapter 7 bankruptcy and then immediately file for bankruptcy again three months after the first bankruptcy is complete.

Accepted Answer

After completing a Chapter 7 bankruptcy, you must wait 8 years from the date you filed the previous case before you can file for Chapter 7 bankruptcy again.

Question 4

For a collective bargaining agreement to be rejected under Chapter 11, the debtor must have first presented the proposed changes to the collective bargaining agreement to the employees' representative, and the employees reject the changes without good cause.

Accepted Answer

Under Chapter 11 bankruptcy proceedings, before a court can allow a debtor to reject a collective bargaining agreement, the debtor must demonstrate that they have made a proposal to the employees' representative for necessary modifications, that the proposal was based on the most complete and reliable information available, and that the employees' representative has refused the proposal without good cause. This requirement ensures that there is an attempt at negotiation and that rejection is a last resort.

Question 5

In a Chapter 11 filing, reorganization may be either voluntary or involuntary.

Accepted Answer

Chapter 11 bankruptcy allows for both voluntary filings by the debtor and involuntary filings initiated by creditors.

Question 6

In which of the following did Congress make comprehensive changes to bankruptcy law?

Accepted Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) made comprehensive changes to bankruptcy law, aiming to make it more difficult for individuals to file for Chapter 7 bankruptcy and encouraging Chapter 13 filings, where debtors repay debts according to a plan.

Question 7

The two general roles of bankruptcy include:

Accepted Answer

The two general roles of bankruptcy are to provide protection to creditors by ensuring an orderly process for dealing with debtor's assets and liabilities, and to offer debtors an opportunity to gain a fresh financial start by discharging certain debts and reorganizing their financial affairs.

Question 8

Before a debtor files for one specific type of relief, the clerk of courts must give the debtor written notice of the other types of relief available.

Accepted Answer

This requirement ensures that debtors are fully informed of their options under different chapters of the Bankruptcy Code before making a decision on how to proceed with their case.

Question 9

Each state has its own rules and regulations in regards to bankruptcy proceedings.

Accepted Answer

The answer of Each state has its own rules and...

Question 10

Bankruptcy proceedings begin with a letter sent to the party by certified mail that a legal proceeding will begin against them.

Accepted Answer

Bankruptcy proceedings begin with the filing of a petition in bankruptcy court, not with a letter sent by certified mail.

Question 11

A bankruptcy trustee may, at times, take over a debtor's business during a Chapter 7 proceeding.

Accepted Answer

In a Chapter 7 bankruptcy, the trustee has the authority to take over the debtor's business operations if it is determined that doing so would benefit the creditors by maximizing the return from the business's assets.

Question 12

An individual must complete credit counseling from a nonprofit budget and credit counseling agency to avoid having his bankruptcy petition dismissed.

Accepted Answer

Before filing for bankruptcy, individuals are required to complete credit counseling from an approved nonprofit budget and credit counseling agency within 180 days before the filing. Failure to do so can result in the dismissal of the bankruptcy petition.

Question 13

After filing a voluntary Chapter 7 bankruptcy petition, assets that a debtor gains are generally not part of the bankruptcy estate unless they fall under an exemption.

Accepted Answer

Assets acquired after filing for bankruptcy are not part of the bankruptcy estate unless they fall under an exemption.

Question 14

If a debtor cannot pay their debts in a timely fashion, they are known as

Accepted Answer

Insolvent debtors are those who cannot pay their debts when they are due, indicating a financial state where liabilities exceed assets or cash flow is insufficient to meet immediate obligations.

Question 15

Under Chapter 7, a debtor must be insolvent to file a voluntary petition for bankruptcy.

Accepted Answer

Under Chapter 7 bankruptcy, a debtor does not need to be insolvent to file a voluntary petition. Both insolvent and solvent debtors can file for Chapter 7 bankruptcy if they meet the eligibility requirements.

Question 16

Legal actions against a debtor can continue after a bankruptcy petition is filed.

Accepted Answer

Once a bankruptcy petition is filed, an automatic stay goes into effect, halting most legal actions against the debtor, including collection efforts and proceedings related to debt.

Question 17

Which of the following is NOT something a bankruptcy judge can make decisions on?

Accepted Answer

Bankruptcy judges primarily handle matters directly related to bankruptcy, such as the administration of bankruptcy proceedings, determining what a debtor's assets are, how those assets are to be sold, and what assets a debtor can keep. They do not have the authority to make decisions on state law claims that are not directly related to the bankruptcy case.

Question 18

If a debtor fails to appear at the Chapter 7 creditors' meeting, the court may refuse to grant the bankruptcy.

Accepted Answer

If a debtor fails to appear at the Chapter 7 creditors' meeting, also known as the 341 meeting, without a valid reason, the court may dismiss the bankruptcy case or refuse to discharge the debtor's debts, effectively denying the bankruptcy relief sought.

Question 19

Some debts that are dischargeable under Chapter 13 are not dischargeable under Chapter 7.

Accepted Answer

Chapter 13 bankruptcy allows for the discharge of some debts that cannot be discharged under Chapter 7, such as certain debts arising from property settlements in divorce or separation proceedings.

Question 20

Which of the following was NOT a reason cited for passing the comprehensive changes to bankruptcy law included in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Accepted Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was designed to make it more difficult, not simpler and easier, for consumers to file for bankruptcy. It aimed to address abuses of the bankruptcy system, not to facilitate bankruptcy filings.

Quiz 32: Bankruptcy and Reorganization