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Practice Exam
Matching Questions
Match the following terms with their definitions:
(2)
A.
Discharge
1.
Property individual debtors can keep for themselves
(5)
B.
Fraudulent transfer
2.
Debtors are not liable for money owed before the filing
(1)
C.
Exempt property
3.
Debtors promise to pay a debt after discharge
(3)
D.
Reaffirmation
4.
Payment to a creditor immediately before filing
(4)
E.
Voidable preference
5.
Payment made within the year before a petition is filed with
the goal of hindering creditors
True/False Questions
Circle true or false:
1.
T
F
One of the primary goals of the Code is to teach the debtor a lesson.
2.
T
F
Each of the Code’s chapters has one of two objectives—rehabilitation or liquidation.
3.
T
F
A creditor is not permitted to force a debtor into bankruptcy.
4.
T
F
The bankruptcy court issues an order for relief to give the debtor a chance to file a petition.
F
The Code permits individual debtors (but not organizations) to keep some property for
themselves.
5.
T
Multiple-Choice Questions
1. 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.
2. 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.
3. 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.
4. A debtor is not required to file the following document with his voluntary petition:
(a) Budget statement for the following three years.
(b) Statement of financial affairs.
(c) List of creditors.
(d) Claim of exemptions.
(e) Schedule of income and expenditures
5. 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) U.S. Trustee/voidable preference