Chapter 30 Test Bankruptcy

Insolvency occurs when a debtor:

• is unable to pay his/her debts as they become due.

• has a larger number of unsecured creditors than secured creditors.

• is unemployed for two consecutive years.

• is declared bankrupt by a Certified Accountant.

What Chapter of the Bankruptcy Code covers liquidation?

• Chapter 7

• Chapter 13

• Chapter 5

• Chapter 11

A voluntary petition under Chapter 7:

• cannot be filed by an insurance corporation.

• requires that the debtor's debts exceed his assets by $5,000.

• requires that the debtor have at least three creditors.

• cannot be made by an individual.

The 2005 revisions of the Bankruptcy Code makes it the responsibility of the _____ to determine that a pleading of insolvency is well grounded in fact and is either warranted by existing law or is based on a good faith argument for extending existing law.

• attorney

• debtor

• creditor

• court

According to the 2005 revisions of the Bankruptcy Code:

• any eviction proceedings in which the landlord obtained a judgment of possession prior to the filing of the bankruptcy petition can be continued.

• any eviction proceedings in which the landlord obtained a judgment of abandonment prior to the filing of the bankruptcy petition can be continued.

• any eviction proceedings in which the landlord obtained a judgment of defeasance prior to the filing of the bankruptcy petition can be continued.

• any eviction proceedings in which the landlord obtained a judgment of vicarious liability prior to the filing of the bankruptcy petition can be continued.

Under the Bankruptcy Act's exemption provisions:

• the debtor must choose either the state or the federal exemption scheme.

• the full value of one's motor vehicle is exempt.

• federal exemptions defeat state exemptions in case of a clash between them.

• state exemption laws that exceed the federal limits (i.e., that are too generous) are void.

Abe and Hanna are husband and wife. They have filed for Chapter 7 Bankruptcy. However, they cannot agree on which set of property exemptions they want to use. Abe wants to use the federal set of exemptions, but Hanna wants to use the set of Michigan, where they have lived for 10 years. Under these circumstances:

• the federal exemptions will apply to this bankruptcy proceeding.

• the Michigan exemptions will apply to this bankruptcy proceeding.

• the federal exemptions will apply to Abe's property and the Michigan exemptions will apply to Hanna's property.

• the bankruptcy court will decide which set of exemptions to apply here.

If a petition for bankruptcy is filed by a health care business:

• the creditors bear the financial responsibility for the disposal of patient records where there are insufficient funds to continue to store them.

• the trustee is instructed to transfer patients in a health care business that is in the process of being closed to an appropriate health care business.

• the necessary costs of closing a health care business is borne by the adjudicating court.

• the automatic stay provisions apply to actions by the Secretary of Health and Human Services to exclude the debtor from participating in federal health care programs.

Which of the following items of a debtor's property are exempt from sale in a bankruptcy proceeding under the federal set of exemptions?

• Life insurance contracts valued at $10,000.

• Real or personal property valued at $50,000.

• Jewelry whose value exceeds $10,000.

• Individual retirement account exceeding $1 million.

An absolute $136,875 homestead cap applies if:

• the debtor's aggregate interest exceeds $1,450 in value in jewellery held primarily for the personal, family, or household use of the debtor.

• retirement funds that are in a fund or account are exempt from taxation under the Internal Revenue Code.

• the debtor's interest exceeds $136,875 in value in real or personal property.

• the bankruptcy court determines that the debtor has been convicted of a felony.