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1 CHAPTER 28 BANKRUPTCY AND REORGANIZATION TRUE/FALSE QUESTIONS Overview of Federal Bankruptcy Law 1. The founders of the U.S. thought the plight of debtors was so important that they included a provision in the U.S. Constitution on bankruptcy. T [easy p. 544] 2. Bankruptcy cases are heard in federal court. T [easy p. 544] 3. The two most common types of bankruptcy filed by businesses are liquidation and reorganization. T [easy p. 544] 4. One of the goals of federal bankruptcy law is to give debtors a chance at a fresh start financially. T [easy p. 544] Chapter 7 Liquidation Bankruptcy 5. A reorganization is also known as straight bankruptcy. F [moderate p. 545] 6. In a voluntary Chapter 7 bankruptcy petition, the debtor must list all property owned, including any exempt property. T [moderate p. 545] 7. A party can be petitioned into bankruptcy against that party’s will. T [easy p. 545] 8. A voluntary petition amounts to an order for relief. T [easy p. 545] 9. In a Chapter 7 bankruptcy, a trustee must be appointed. T [moderate p. 546] 10. A proof of claim is not required to be filed by a secured creditor. T [moderate p. 547 11. The automatic stay would stop a secured creditor from repossessing any collateral. T [moderate p. 547] Property of the Bankruptcy Estate
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2 12. The bankruptcy estate includes all property that the petitioner receives after the petition is filed. F [moderate p. 548] 13. An inheritance received by an individual debtor four months after filing a Chapter 7 bankruptcy becomes part of the bankruptcy estate. T [moderate p. 548] 14. With exempt property, any security interest associated with the property is ineffective. F [moderate p. 549] 15. States may pass their own exemption laws, which may be either mandatory or optional for debtors in those states. T [easy p. 549] Voidable Transfers 16. Thirty days before filing for bankruptcy Gamma Corporation gives a lien to First Bank to secure a loan it took out one year ago. This is a preferential transfer that will set aside by the Bankruptcy Court. T [moderate p. 551] 17. For insiders, the period for preferential transfers is extended to one year. T [moderate p. 551] 18. For a fraudulent transfer to be avoided, it must have been made to an insider of the bankruptcy petitioner. F [moderate p. 551] Distribution of Property and Discharge 19. A secured creditor’s claim has priority to the debtor’s property has priority over the claim of an unsecured creditor. T [easy p. 552] 20. Fees and expenses of administration are paid before the claims of secured creditors. F [moderate p. 553] 21. Alimony is not dischargeable in a Chapter 7 proceeding. T [easy p. 553] 22. Claims for taxes for the two years immediately preceding a bankruptcy filing can be discharged. . F [moderate p. 554] 23. Student loans cannot be discharged in bankruptcy unless they would cause an “undue hardship” to the debtor and his/her dependents.
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