Bankruptcy Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

A bustout is a planned bankruptcy. To perpetrate this type of scheme, in which order must the following steps be taken by the underlying business?

I. Close and file bankruptcy.
II. Purchase large quantities of goods using credit.
III. Obtain credit from vendors.
IV. Sell the inventory at a significant discount.

A. III then II then I then IV
B. I then IV then III then II
C. II then III then IV then I
D. III then II then IV then I

A

D. III then II then IV then I

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

With the powers recommended under the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles), the bankruptcy administrator may request relevant information from third parties who have knowledge of the debtor’s affairs (such as banks and customers) but cannot compel the third parties to provide the information.

A. True
B. False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Which of the following scenarios is MOST LIKELY an example of a fraudulent conveyance bankruptcy scheme?

A. Johanna, the debtor in a bankruptcy proceeding, takes steps to hide her books and records from Midland Used Cars, one of her creditors.
B. The owner of a rug store purchases five hundred rugs using the company’s credit, sells them for cash, and then immediately files for bankruptcy on the company’s behalf.
C. The owner of an electronics store transfers 20% of the store’s inventory to her son, and then she files for bankruptcy on the company’s behalf one week later.
D. Sam steals the identity of a third party, purchases expensive jewelry with their credit card, and then files for bankruptcy under their name.

A

C. The owner of an electronics store transfers 20% of the store’s inventory to her son, and then she files for bankruptcy on the company’s behalf one week later.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Suzanne owns a business, but she has decided to close it and file for bankruptcy. Before she does so, she orders a large quantity of inventory using credit and resells it for cash. She closes the business and leaves the suppliers with almost nothing to recover in the bankruptcy proceeding that follows. Which of the following BEST describes Suzanne’s scheme?

A. Concealed asset scheme
B. Pump and dump scheme
C. Bustout scheme
D. Multiple filings scheme

A

C. Bustout scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Acme Corporation initiated a bankruptcy proceeding in which all its assets will be sold and the proceeds distributed to creditors. Under the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles), which of the following parties is an appropriate option for managing Acme’s estate in the proceedings?

A. An independent insolvency representative
B. The creditors of Acme Corporation
C. The directors of Acme Corporation
D. All of the above are appropriate options

A

A. An independent insolvency representative

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A successful liquidation bankruptcy case results in the selling of the debtor’s property to pay creditors and the discharging of the debtor’s dischargeable debts.

A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

The purpose of a liquidation bankruptcy filing is to allow the debtor respite from creditors so that the debtor can reorganize its financial affairs and continue as a going concern.

A. True
B. False

A

False

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

A transfer of assets is a fraudulent conveyance if the purpose of the transfer is to hinder, delay, or defraud a creditor.

A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A debtor in a bankruptcy proceeding took steps to hide their books and records from a creditor. What kind of scheme did the debtor commit?

A. A concealed assets scheme
B. A petition mill scheme
C. A bustout scheme
D. An asset misappropriation scheme

A

A. A concealed assets scheme

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

In a bustout scheme, which of the following types of assets does the fraudster typically purchase and then sell prior to closing the business?

A. Inventory or goods
B. Real estate
C. Legal or accounting services
D. Business insurance policies

A

A. Inventory or goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Under the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles), which of the following statements MOST ACCURATELY represents the recommended powers of a bankruptcy administrator (or an equivalent appointee)?

A. The administrator has the ability to cancel fraudulent transactions entered into by the debtor.
B. The administrator is allowed to collect and preserve the debtor’s property but has no power to dispose of it.
C. The administrator is not authorized to compel testimony from third parties who have knowledge of the debtor’s financial affairs.
D. The administrator must abide by all contracts the debtor entered into prior to bankruptcy

A

A. The administrator has the ability to cancel fraudulent transactions entered into by the debtor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

ABC Corporation is involved in a reorganization bankruptcy proceeding, after which it will continue operations. Under the World Bank Principles for Effective Insolvency and Creditor/Debtor Regimes (World Bank Principles), which of the following parties is an appropriate option for managing ABC during the proceedings?

A. Supervision of ABC’s management is undertaken by an independent insolvency representative
B. Exclusive control by an independent insolvency representative
C. ABC’s management retains control
D. All of the above

A

D. All of the above

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The MOST COMMON type of bankruptcy fraud scheme is the concealment of assets.

A. True
B. False

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly