Question 1

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property.This is

Accepted Answer

A)   a lien.
B)   a fraud.
C)   a guaranty.
D)   a garnishment.E) A) and D)
F) B) and C) A

Question 2

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

Accepted Answer

A) True 
 B)False

Question 3

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary.

Accepted Answer

A) True 
 B)False

Question 4

Under Chapter 7,once the proceeds have been distributed,the obligations of the debtor most likely to be discharged are

Accepted Answer

A)   taxes accruing within the last three years.
B)   claims based on the debtor's willful or malicious conduct or fraud.
C)   none of the choices.
D)   domestic-support obligations.E) C) and D)
F) B) and C)

Question 5

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Accepted Answer

A) True 
 B)False

Question 6

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start,a discharge under Chapter 7 frees a debtor of all of his or her debts.

Accepted Answer

A) True 
 B)False

Question 7

Dot is awarded $150,000 in a suit against Evan,and obtains a court order to sell Evan's home at auction to satisfy the debt.Half of the $100,000 proceeds from the sale are paid to Dot toward the judgment.Under a state exemption statute,the remainder is given to Evan as

Accepted Answer

A)   his homestead exemption.
B)   a deficiency judgment.
C)   the excess over a federal cap on the amount a creditor can claim on a judgment debt.
D)   part payment on the claims of other creditors or a bankruptcy trustee.E) B) and D)
F) None of the above

Question 8

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11,but not Chapter 13,bankruptcies.

Accepted Answer

A) True 
 B)False

Question 9

Foreclosure is a process that allows a debtor to legally block a creditor's repossession and sale of property securing a mortgage.

Accepted Answer

A) True 
 B)False

Question 10

Compared to Chapter 7 and 11 plans,a Chapter 13 plan

Accepted Answer

A)   permits creditors to force a debtor into involuntary bankruptcy.
B)   allows a debtor to retain possession of his or her assets.
C)   is more expensive and more complicated.
D)   permits any interested party to file a repayment plan.E) A) and B)
F) B) and C) B

Question 11

Under Chapter 13,all debts are dischargeable.

Accepted Answer

A) True 
 B)False

Question 12

Under Chapter 7,a discharge is most likely to be denied if the debtor

Accepted Answer

A)   conceals property to hinder or delay a creditor.
B)   destroys records of the debtor's financial condition.
C)   fails to attend a required consumer education course.
D)   all of the choices.E) A) and B)
F) C) and D)

Question 13

Rashi is a student at State University.In need of funds to pay for tuition and books,Rashi asks Tiempo Loans,Inc. ,for a short-term loan.The lender agrees to make a loan if Rashi will have someone who is financially responsible guarantee the loan payments.Umberto,a well-known businessperson and a friend of Rashi's family,calls Tiempo and agrees to pay the loan if Rashi cannot.Because of Umberto's reputation,the loan is made.Rashi is making the payments,but because of illness he is unable to work for one month.He asks Tiempo to extend the loan for three months.The lender agrees,raising the interest rate for the extended period.Umberto is not notified of the extension and thus does not consent to it.Later,all attempts to collect the remainder of the loan from Rashi fail.Can Tiempo assert a claim against Umberto on the debt?

Accepted Answer

Tiempo cannot hold Umberto liable for two reasons.
First,Umberto's agreement is a guaranty contract to answer for the debt of another.The contract with the lender provided that Umberto would pay if Rashi could not;therefore,Umberto was made a guarantor,with secondary liability.For a guaranty contract to be enforceable,it must be in writing unless the "main purpose" rule applies.Because the contract was made over the phone and the guaranty was not for Umberto's primary benefit,the oral guaranty contract is unenforceable.
Second,guarantors have certain defenses against creditors that usually depend on certain actions being taken by the creditor.The extension agreement in this case is binding (the increased interest rate is the consideration),but it constitutes a material change in the original contract.Any binding,material change made in the terms of an original contract between a debtor and a creditor without the consent of the guarantor discharges the guarantor entirely,or at least to the extent that the guarantor suffers a loss.In this problem,that occurred when the lender agreed to extend the term of the loan at a higher interest rate without notifying and obtaining the guarantor's consent.Thus,Umberto has a defense against Tiempo's claim that would prevail even if the guaranty contract had been in writing.

Question 14

A court can dismiss a Chapter 7 petition if it finds that the use of Chapter 7 would constitute substantial abuse.

Accepted Answer

A) True 
 B)False

Question 15

To purchase a house,Nora obtains a mortgage loan from Oak Tree Loans LLC.Later,Nora informs Oak Tree that she may default on the payments.The lender agrees to delay taking possession of the property and selling it.The parties negotiate a payment plan for the amount due on the loan.This is

Accepted Answer

A)   forbearance.
B)   a short sale.
C)   a workout agreement.
D)   none of the choices.E) B) and C)
F) A) and D)

Question 16

Equipment Company holds a lien on Fertile Farm's equipment.The equipment can be sold to satisfy the debt

Accepted Answer

A)   if,before the sale,notice is given to Fertile Farm.
B)   if,before the sale,notice is given to Fertile Farm's other creditors.
C)   if,before the sale,notice is given to the general public.
D)   without notice.E) B) and C)
F) B) and D)

Question 17

When a co-surety pays more than his or her proportionate share on a debtor's default,he or she is entitled to recover from the debtor the excess amount paid.

Accepted Answer

A) True 
 B)False

Question 18

In a Chapter 11 proceeding,for an individual debtor,the court may order discharge at any time after the plan is confirmed.

Accepted Answer

A) True 
 B)False

Question 19

Items of personal property that can be replaced by goods readily available in the marketplace are not exempt from satisfaction of judgment debts.

Accepted Answer

A) True 
 B)False

Question 20

Dana operates Energy Inc. ,a corporation in the fuel-supply business.Dana wants to create a plan under which the firm pays a portion of its debts,is discharged of the remainder,and is allowed to continue in business.Energy should file a petition in bankruptcy for relief through

Accepted Answer

A)   a liquidation.
B)   a reorganization.
C)   a repayment plan.
D)   an adjustment of debts.E) None of the above
F) A) and B)

Exam 13: Creditor-Debtor Relations and Bankruptcy

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property.This is

Correct Answer
verified
A

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

Correct Answer
verified

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary.

Correct Answer
verified

Under Chapter 7,once the proceeds have been distributed,the obligations of the debtor most likely to be discharged are

Correct Answer
verified

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Correct Answer
verified

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start,a discharge under Chapter 7 frees a debtor of all of his or her debts.

Correct Answer
verified

Dot is awarded $150,000 in a suit against Evan,and obtains a court order to sell Evan's home at auction to satisfy the debt.Half of the $100,000 proceeds from the sale are paid to Dot toward the judgment.Under a state exemption statute,the remainder is given to Evan as

Correct Answer
verified

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11,but not Chapter 13,bankruptcies.

Correct Answer
verified

Foreclosure is a process that allows a debtor to legally block a creditor's repossession and sale of property securing a mortgage.

Correct Answer
verified

Compared to Chapter 7 and 11 plans,a Chapter 13 plan

Correct Answer
verified
B

Under Chapter 13,all debts are dischargeable.

Correct Answer
verified

Under Chapter 7,a discharge is most likely to be denied if the debtor

Correct Answer
verified

A court can dismiss a Chapter 7 petition if it finds that the use of Chapter 7 would constitute substantial abuse.

Correct Answer
verified

To purchase a house,Nora obtains a mortgage loan from Oak Tree Loans LLC.Later,Nora informs Oak Tree that she may default on the payments.The lender agrees to delay taking possession of the property and selling it.The parties negotiate a payment plan for the amount due on the loan.This is

Correct Answer
verified

Equipment Company holds a lien on Fertile Farm's equipment.The equipment can be sold to satisfy the debt

Correct Answer
verified

When a co-surety pays more than his or her proportionate share on a debtor's default,he or she is entitled to recover from the debtor the excess amount paid.

Correct Answer
verified

In a Chapter 11 proceeding,for an individual debtor,the court may order discharge at any time after the plan is confirmed.

Correct Answer
verified

Items of personal property that can be replaced by goods readily available in the marketplace are not exempt from satisfaction of judgment debts.

Correct Answer
verified

Dana operates Energy Inc. ,a corporation in the fuel-supply business.Dana wants to create a plan under which the firm pays a portion of its debts,is discharged of the remainder,and is allowed to continue in business.Energy should file a petition in bankruptcy for relief through

Correct Answer
verified

Exam 13: Creditor-Debtor Relations and Bankruptcy

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property.This is

Correct AnswerverifiedA

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

Correct AnswerverifiedShow Answer

A debtor cannot defend against an involuntary bankruptcy petition because that would be contrary to the definition of involuntary.

Correct AnswerverifiedShow Answer

Under Chapter 7,once the proceeds have been distributed,the obligations of the debtor most likely to be discharged are

Correct AnswerverifiedShow Answer

A court cannot dismiss a debtor's petition under Chapter 13 even if the circumstances indicate bad faith.

Correct AnswerverifiedShow Answer

Because the purpose of a Chapter 7 proceeding is to provide a debtor with a fresh start,a discharge under Chapter 7 frees a debtor of all of his or her debts.

Correct AnswerverifiedShow Answer

Dot is awarded $150,000 in a suit against Evan,and obtains a court order to sell Evan's home at auction to satisfy the debt.Half of the $100,000 proceeds from the sale are paid to Dot toward the judgment.Under a state exemption statute,the remainder is given to Evan as

Correct AnswerverifiedShow Answer

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11,but not Chapter 13,bankruptcies.

Correct AnswerverifiedShow Answer

Foreclosure is a process that allows a debtor to legally block a creditor's repossession and sale of property securing a mortgage.

Correct AnswerverifiedShow Answer

Compared to Chapter 7 and 11 plans,a Chapter 13 plan

Correct AnswerverifiedB

Under Chapter 13,all debts are dischargeable.

Correct AnswerverifiedShow Answer

Under Chapter 7,a discharge is most likely to be denied if the debtor

Correct AnswerverifiedShow Answer

A court can dismiss a Chapter 7 petition if it finds that the use of Chapter 7 would constitute substantial abuse.

Correct AnswerverifiedShow Answer

To purchase a house,Nora obtains a mortgage loan from Oak Tree Loans LLC.Later,Nora informs Oak Tree that she may default on the payments.The lender agrees to delay taking possession of the property and selling it.The parties negotiate a payment plan for the amount due on the loan.This is

Correct AnswerverifiedShow Answer

Equipment Company holds a lien on Fertile Farm's equipment.The equipment can be sold to satisfy the debt

Correct AnswerverifiedShow Answer

When a co-surety pays more than his or her proportionate share on a debtor's default,he or she is entitled to recover from the debtor the excess amount paid.

Correct AnswerverifiedShow Answer

In a Chapter 11 proceeding,for an individual debtor,the court may order discharge at any time after the plan is confirmed.

Correct AnswerverifiedShow Answer

Items of personal property that can be replaced by goods readily available in the marketplace are not exempt from satisfaction of judgment debts.

Correct AnswerverifiedShow Answer

Dana operates Energy Inc. ,a corporation in the fuel-supply business.Dana wants to create a plan under which the firm pays a portion of its debts,is discharged of the remainder,and is allowed to continue in business.Energy should file a petition in bankruptcy for relief through

Correct AnswerverifiedShow Answer

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A

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B

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