CPA Regulation (REG) : Business Law - Bankruptcy
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Example Questions
Example Question #1 : Business Law Bankruptcy
A debtor who filed voluntarily and received a discharge in bankruptcy under the provisions of Chapter 7 of the federal Bankruptcy Code:
May obtain another voluntary discharge in bankruptcy under Chapter 7 after five years have elapsed from the date of the prior filing.
Is precluded from owning or operating a similar business for two years.
Must surrender for distribution to the creditors any amount received as an inheritance if received within 180 days after filing the petition.
Will receive a discharge of any and all debts owed.
Must surrender for distribution to the creditors any amount received as an inheritance if received within 180 days after filing the petition.
Several items in a debtor’s personal property may be included in the property of the estate if received within 180 days of filing: property received as part of inheritance, divorce, or insurance, as well as income generated from estate property.
Example Question #1 : Business Law Bankruptcy
Which of the following assets would be included in a debtor’s bankruptcy estate in a liquidation proceeding?
Proceeds from a life insurance policy received 45 days after the petition was filed.
Wages earned by the debtor after the petition was filed.
An inheritance received 365 days after the petition was filed
Property from a divorce settlement received 270 days after the petition was filed
Proceeds from a life insurance policy received 45 days after the petition was filed.
Several items in a debtor’s personal property may be included in the property of the estate if received within 180 days of filing: property received as part of inheritance, divorce, or insurance, as well as income generated from estate property.
Example Question #2 : Business Law Bankruptcy
Sharon sells her two-year-old convertible to her father for $200. The next week, Sharon files for bankruptcy under Chapter 7. Regarding the sale of the car, the trustee may:
Cancel it as a voidable preference.
Not cancel it because it is a sale, not a gift.
Not cancel it, but can sue Sharon’s father for the return of the $200.
Cancel it as a fraudulent transfer.
Cancel it as a fraudulent transfer.
Fraudulent transfers occur when someone intentionally transfers property ownership in an attempt to reduce or limit the assets subject to distribution to creditors. In this case, since the value of the convertible would far exceed the amount of cash received in the exchange and was made to a close family member, the transfer would be regarded as an attempt to limit creditors’ access to the car in the distributable property at settlement.
Example Question #3 : Business Law Bankruptcy
Per the liquidation provisions of Ch 7 of the US Bankruptcy Code, certain property acquired by the debtor after the filing of the petition becomes part of the bankruptcy estate. An example of such property is:
Wages earned by the debtor within one year after filing the petition
Social Security payments received by the debtor within 180 days after filing the petition
Child support payments received by the debtor within one year after filing the petition
Inheritances received by the debtor within 180 days of filing the petition
Inheritances received by the debtor within 180 days of filing the petition
The estate includes income generated from estate property and property the debtor receives from a bequest, devise, inheritances, property settlement, divorce, or beneficial interest in life insurance within 180 after filing the petition.
Example Question #4 : Business Law Bankruptcy
Of the following requirements, which must be met for creditors to file an involuntary bankruptcy petition under Ch 7 of the Federal Bankruptcy Code?
At least one fully secured creditor must join in the petition
The debtor must owe one creditor more than $5,000
The debtor has not been paying its bona fide debts as they become due
There must not be more than 12 creditors
The debtor has not been paying its bona fide debts as they become due
An involuntary petition for bankruptcy can be filed if a debtor owes more than $16,750 in unsecured debt and is not paying its debts as they become due.
Example Question #5 : Business Law Bankruptcy
Per the provisions of Chapter 7 of the US Federal Bankruptcy Code, if the debtor _______ he or she will be denied a discharge in bankruptcy.
Does not list a creditor
Is unable to pay administrative expenses
Owes payments of alimony and support
Will not explain satisfactorily a loss of assets to the court
Will not explain satisfactorily a loss of assets to the court
Per the provisions of Chapter 7 Bankruptcy law, the debtor will be denied a discharge from the bankruptcy if they cannot or refuse to explain a loss of their assets.
Example Question #7 : Business Law Bankruptcy
Which of the following requirements must be met for creditors to file an involuntary bankruptcy petition under Chapter 7 of the federal Bankruptcy Code?
The debtor has not been paying its bona fide debits as they become due.
At least one fully secured creditor must join the petition.
There must not be more than 12 creditors.
The debtor must owe one creditor more than $5,000.
The debtor has not been paying its bona fide debits as they become due.
The primary requirement for a petition of involuntary bankruptcy is that creditors must demonstrate that a debtor has defaulted on repayments of debts. Involuntary petitions must be filed only by creditors who are owed, individually or in the aggregate, at least $16,750 in unsecured, undisputed debt. If there are fewer than 12 creditors, the aggregate threshold of unsecured debt is $16,750; if there are more than 12, at least three who are owed $16,750 in the aggregate must join the petition.
Example Question #6 : Business Law Bankruptcy
A reorganization under Chapter 11 of the federal Bankruptcy Code requires all of the following except the:
Liquidation of the debtor.
Confirmation of the reorganization plan by the court.
The filing of a reorganization plan.
Opportunity for each class of claims to accept the reorganization plan.
Liquidation of the debtor.
The primary feature of reorganization under Chapter 11 is to create a plan between the debtor and creditors which best satisfies all parties involved. Liquidation does not occur, and the debtors maintains control of the debtor’s assets.
Example Question #7 : Business Law Bankruptcy
Which of the following statements is correct with respect to the reorganization provisions of Chapter 11 of the federal Bankruptcy Code?
The commencement of a bankruptcy case may be voluntary or involuntary.
The debtor must be insolvent if the bankruptcy petition was filed voluntarily.
A reorganization plan may be filed by a creditor any time after the petition date.
A trustee must always be appointed.
The commencement of a bankruptcy case may be voluntary or involuntary.
Under Chapter 11, a debtor may file voluntarily, or its creditors may file an involuntary petition. Under a voluntary petition, the debtor need not be insolvent, though individuals must pass income tests to determine eligibility. Chapter 11 does not usually involve a trustee, and the debtor has an exclusive right to file a plan in the first 120 days after filing a petition.
Example Question #8 : Business Law Bankruptcy
A debtor who filed voluntarily and received a discharge in bankruptcy under the provisions of Ch 7 of the Federal Bankruptcy Code:
May obtain another voluntary discharge in bankruptcy under Ch 7 after five years have elapsed from the date of the prior filing
Will receive a discharge of any and all debts owed
Must surrender for distribution to the creditors any amount received as an inheritance if received within 180 days after filing the petition
Is precluded from owning or operating a similar business for two years
Must surrender for distribution to the creditors any amount received as an inheritance if received within 180 days after filing the petition
An inheritance received within 180 days after the filing of the petition must be surrendered for distribution to the creditors.
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