Ch 3 Deck 12

Question 1

When a company declares bankruptcy under Chapter 11, the company

Answer 1

undergoes a plan of reorganization and continues to function as a business

Question 2

When a company declares bankruptcy under Chapter 7

Answer 2

the company is liquidated

Question 3

Rather than dissolving the company, in a Chapter 11 bankruptcy, the company

Answer 3

continues to exist, but under a reorganized plan

Question 4

Under chapter 11, The reorganized plan requires approval by

Answer 4

the bankruptcy court

Question 5

Under chapter 11, the bankruptcy court will often ask creditors to

Answer 5

vote on the plan

Question 6

A Chapter 11 bankruptcy begins with a

Answer 6

petition for bankruptcy with the bankruptcy court

Question 7

under chapter 11, the petition is either filed

Answer 7

voluntarily by the debtor or involuntarily by the creditors

Question 8

In Chapter 11 bankruptcy, the US Trustee has

Answer 8

a more limited role than in other types of bankruptcy.

Question 9

In Chapter 11 bankruptcy, the US Trustee monitors the following activities

Answer 9

1) the debtor in possession’s operation of business,
2) applications for compensation and reimbursement by professionals,
3) filing of fees, and
4) the company’s compliance with debtor in possession reporting requirements.

Question 10

In Chapter 11 bankruptcy, the US Trustee conducts a meeting of

Answer 10

the creditors

Question 11

In Chapter 11 bankruptcy, the US Trustee conducts a meeting of the creditors in which the US Trustee and the creditors can question the debtor under oath regarding

Answer 11

their conduct
administration of the case
property

Question 12

The Bankruptcy Code maintains that a chapter 11 reorganizational plan must designate

Answer 12

classes of claims

Question 13

Chapter 11 Section 1126(c) states that an entire class of claims will be deemed to accept a plan if

Answer 13

the plan is accepted by creditors who hold at least two-thirds in amount and more than one half in number of the allowed claims in the class.

Question 14

Section 726 of the Bankruptcy Code dictates an order of payments under Chapter 7 Bankruptcy:

Answer 14

1. Secured claims
2. Priority claims
3. Unsecured claims
4. Preferred stockholders
5. Common stockholders

Question 15

Under chapter 7 bankruptcy, secured claims are paid from

Answer 15

collateral securing claims (e.g. sale of property, lien, mortgage)

Question 16

Under chapter 7 bankruptcy, priority claims are paid in an order detailed in

Answer 16

section 507 of the bankruptcy code

Question 17

Under chapter 7 bankruptcy, priority claims include (in order)

Answer 17

1. administrative expenses
2. wages due employees
3. Claims for unpaid contributions to employee benefit plans

Question 18

under chapter 7 bankruptcy, unsecured claims include

Answer 18

1. Customer deposits
2. taxes due to federal state, county
3. General creditors

Question 19

under chapter 7 General creditors are also called

Answer 19

unsecured creditors

Question 20

under chapter 7 General creditors include (in order)

Answer 20

senior debt

subordinated debt

Question 21

under chapter 7, wages due workers are paid if

Answer 21

earned within three months prior to the filing of the petition

Question 22

under chapter 7, wages due workers are limited to

Answer 22

$10,000 per employee

Question 23

under chapter 7, Unsecured claims for customer deposits, not to exceed

Answer 23

a maximum of $1,800 per individual.

Question 24

under chapter 7 taxes are unsecured debt, with the exception that

Answer 24

if the IRS had filed a tax lien prior to a bankruptcy filing, the IRS becomes a “Secured Creditor.”

Question 25

under chapter 7 Preferred stockholders can receive

Answer 25

an amount up to the par value of the issue.