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Quiz 36 :

Bankruptcy

Quiz 36 :

Bankruptcy

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What about the rules regarding repeated bankruptcy filings? Debtors cannot obtain a discharge under Chapter 7 within eight years of a prior filing. Under Chapter 13, no discharge is available within four years of a prior Chapter 7 or 11 filing and within two years of a prior Chapter 13 filing. Are these rules too onerous, too lenient, or just right?
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Rules for repeated filings for bankruptcy:
Some debtors are attracted by bankruptcy and like the fresh start. Therefore, under chapter 7 or 11, any debtor has been discharged they cannot receive further discharge for minimum 8 years under Chapter 7 after prior filing. Under chapter 13, a debtor received prior discharge they cannot receive discharge (most cases) for minimum 6 years under Chapter 7.
The above rules for repeated filings are more lenient. Government should look into it and take steps to the debtors who purposively avail loan make them bankrupt. Debtor avail more loan and credit, enjoy their life, and filed for bankruptcy. If it is approved by the judge of bankruptcy, there is no need to pay the creditors. Hence, the government should restrict the rules and exemptions on bankruptcy.

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Some states permit debtors an unlimited exemption on their homes. Is it fair for bankrupts to be allowed to keep multimillion dollar homes while their creditors remain unpaid? But other states allow as little as $5,000. Should bankrupts be thrown out on the street? What amount is fair?
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State's rules on exempt on home towards bankruptcy:
The exemption rules are varying from state to state under the bankruptcy. Some states allow unlimited exemption on their home and some other states allowed only low such as $5,000 for their home.
This kind of exemption within the same country is unfair. Even though the unlimited exemptions on house is not acceptable when the person keeps a home worth millions while the creditors remain unpaid.
How some states restrict the exemption to $5,000 is also unfair. Hence, the state federal should fix the exemption as fair value. It should not affect the creditor as well as the debtor.
Bankruptcy may be thrown in the street, because many people use the bankruptcy for unfair purpose. People avail more loan and credit, enjoy their life, and filed for bankruptcy. If it is approved by the judge of bankruptcy, there is no need to pay the creditors. Hence, the government should restrict the rules and exemptions on bankruptcy.

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Dale is in bankruptcy proceedings under Chapter 13. Which of the following statements is true? (a) His debtors must have filed an involuntary petition. (b) His unsecured creditors will be worse off than if he had filed under Chapter 7. (c) All of his debts are discharged as soon as the court approves his plan. (d) His creditors have an opportunity to voice objections to his plan.
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Bankruptcy proceedings:
The debtors under the chapter 13 only may appear before the bankruptcy judge for hearing.
In the bankruptcy proceedings, D's creditors have a chance to voice objection to debtors plan. Hence, option
img is correct.
Likewise,
D's debtors need not file an involuntary petition. Hence, option "a" is wrong.
D's unsecure creditors would not be worse off than if D had filed a petition under chapter 7. Hence, option b is wrong.
All the debits are not discharged after the court approves his plan. Hence, option C is wrong.

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ETHICS On November 5, Hawes, Inc., a small subcontractor, opened an account with Basic Corp., a supplier of construction materials. Hawes promised to pay its bills within 30 days of purchase. Although Hawes purchased a substantial quantity of goods on credit from Basic, it made few payments on the accounts until the following March, when it paid Basic over $21,000. On May 14, Hawes filed a voluntary petition under Chapter 7. Does the bankruptcy trustee have a right to recover this payment? Is it fair to Hawes's other creditors if Basic is allowed to keep the $21,000 payment?
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CPA QUESTION A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code: (a) is not available to a corporation unless it has previously filed a petition under the reorganization provisions of Chapter 11 of the Code. (b) automatically stays collection actions against the debtor except by secured creditors. (c) will be dismissed unless the debtor has 12 or more unsecured creditors whose claims total at least $5,000. (d) does not require the debtor to show that the debtor's liabilities exceed the fair market value of assets.
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James, the owner of an auto parts store, told his employee, Rickey, to clean and paint some tires in the basement. Highly flammable gasoline fumes accumulated in the poorly ventilated space. James threw a firecracker into the basement as a joke, intending only to startle Rickey. Sparks from the firecracker caused an explosion and fire that severely burned him. Rickey filed a personal injury suit against James for $1 million. Is this debt dischargeable under Chapter 7?
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After filing for bankruptcy, Yvonne Brown sought permission of the court to reaffirm a $6,000 debt to her credit union. The debt was unsecured, and she was under no obligation to pay it. The credit union had published the following notice in its newsletter: If you are thinking about filing bankruptcy, THINK about the long-term implications. This action, filing bankruptcy, closes the door onTOMORROW. Having no credit means no ability to purchase cars, houses, credit cards. Look into the future-no loans for the education of your children. Should the court approve Brown's reaffirmation?
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CPA QUESTION Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed a petition against Unger under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger's liabilities exceed Unger's assets. Unger has filed papers opposing the bankruptcy petition. Which of the following statements regarding Quincy's petition is correct? (a) It will be dismissed because the secured creditor failed to join in the filing of the petition. (b) It will be dismissed because three unsecured creditors must join in the filing of the petition. (c) It will be granted because Unger's liabilities exceed Unger's assets. (d) It will be granted because Unger is unable to pay Unger's debts as they become due.
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Look on the web for your state's rules on exempt property. Compared with other states and the federal government, is your state generous or stingy with exemptions? In considering a new bankruptcy statute, Congress struggled mightily over whether or not to permit state exemptions at all. Is it fair for exemptions to vary by state? Why should someone in one state fare better than his her neighbor across the state line?
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Mary Price went for a consultation about a surgical procedure to remove abdominal fat. When Robert Britton met with her, he wore a name tag that identified him as a doctor, and was addressed as "doctor" by the nurse. Britton then examined Price, touching her stomach and showing her where the incision would be made. But Britton was the office manager, not a doctor. Although a doctor actually performed the surgery on Price, Britton was present. It turned out that the doctor left a tube in Price's body at the site of the incision. The area became infected, requiring corrective surgery. A jury awarded Price $275,000 in damages in a suit against Britton. He subsequently filed a Chapter 7 bankruptcy petition. Is this judgment dischargeable in bankruptcy court?
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YOU BE THE JUDGE WRITING PROBLEM Lydia D'Ettore received a degree in computer programming at the DeVry Institute of Technology, with a grade point average of 2.51. To finance her education, she borrowed $20,516.52 from a federal student loan program. After graduation, she could not find a job in her field, so she went to work as a clerk at an annual salary of $12,500.D'Ettore and her daughter lived with her parents free of charge. After setting aside $50 a month in savings and paying bills that included $233 for a new car (a Suzuki Samurai) and $50 for jewelry from Zales, her disposable income was $125 permonth.D'Ettore asked the bankruptcy court to discharge the debts she owedDeVry for her education. Did the debts to the DeVry Institute impose an undue hardship on D'Ettore? Argument for D'Ettore: Lydia D'Ettore lives at home with her parents. Even so, her disposable income is a meager $125 a month. She would have to spend every single penny of her disposable income for nearly 15 years to pay back her $20,500 debt to DeVry. That would be an undue hardship. Argument for the Creditors: The U.S. government guaranteedD'Ettore's loan. Therefore, if the court discharges it, the American taxpayer will have to pay the bill. Why should taxpayers subsidize an irresponsible student? D'Ettore must also stop buying new cars and jewelry. And why should the government pay her debts while she saves money every month?
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CPA QUESTION Decal Corp. incurred substantial operating losses for the past three years. Unable to meet its current obligations, Decal filed a petition of reorganization under Chapter 11 of the federal Bankruptcy Code. Which of the following statements is correct? (a) A creditors' committee, if appointed, will consist of unsecured creditors. (b) The court must appoint a trustee to manage Decal's affairs. (c) Decal may continue in business only with the approval of a trustee. (d) The creditors' committee must select a trustee to manage Decal's affairs.
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In the Grisham case, the debtor had virtually no income but owed about $200,000 in debts that could not be discharged. What kind of fresh start is that? Should limits be placed on the total debt that cannot be discharged? Is the list of non-dischargeable debts appropriate?
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A bankrupt who owns a house has the option of either paying the mortgage or losing his home. The only advantage of bankruptcy is that his debt to the bank is discharged. The U.S. House of Representatives passed a bill permitting a bankruptcy judge to adjust the terms of mortgages to aid debtors in holding onto their houses. Proponents argued that this change in the law would reduce foreclosures and stabilize the national housing market. Opponents said that it was not fair to reward homeowners for being irresponsible. How would you vote if you were in the Senate?
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Ibrahim Khan caused an automobile accident in which a fellow physician, Dolly Yusufji, became a quadriplegic. Khan signed a contract for the lifetime support of Yusufji. When he refused to make payments under the contract, she sued him and obtained a judgment for $1,205,400. Khan filed a Chapter 11 petition. At the time of the bankruptcy hearing, five years after the accident, Khan had not paid Yusufji anything. She was dependent on a motorized wheelchair; he drove a Rolls-Royce. Is Khan's debt dischargeable under Chapter 11?
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Grass Co. is in bankruptcy proceedings under Chapter 11._________ serves as trustee. In the case of _______the court can approve a plan of reorganization over the objections of the creditors. (a) The debtor in possession; a cramdown (b) A person appointed by the U.S. Trustee; fraud (c) The head of the creditors' committee; reaffirmation (d) The U.S. Trustee; voidable preference
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