Discharge and Reaffirmation

Question 1

Question #3 (AICPA.931131REG-BL)
Which of the following acts by a debtor could result in a bankruptcy court revoking the debtor’s discharge?

I. Failure to list one creditor.

II. Failure to answer correctly material questions on the bankruptcy petition.

A. I only.

B. II only.

C. Both I and II.

D. Neither I nor II.

Answer 1

B. II only.

A discharge is usually final. It will be revoked only if later evidence suggests that the debtor acted fraudulently or intentionally misled the bankruptcy court. Failure to list one creditor is probably not a fraudulent action, particularly if there are many creditors. Failing to answer important questions honestly and accurately may well indicate fraud.

Wrong

A. I only.
A discharge is usually final. It will be revoked only if later evidence suggests that the debtor acted fraudulently or intentionally misled the bankruptcy court. Failure to list one creditor is probably not a fraudulent action, particularly if there are many creditors. Failing to answer important questions honestly and accurately may well indicate fraud.

Failure to list one credit will not cause the bankruptcy court to revoke the whole discharge. The creditor just will not be included in receiving bankruptcy payments. Removes creditor from bankruptcy proceedings.

Question 2

Question #6 (AICPA.901132REG-BL)
Chapter 7 of the Federal Bankruptcy Code will deny a debtor a discharge when the debtor
A. Makes a preferential transfer to a creditor.

B. Accidentally destroys information relevant to the bankruptcy proceeding.

C. Obtains a Chapter 7 discharge ten years previously.

D. Is a corporation or a partnership.

Answer 2

D. Is a corporation or a partnership.

Corporations and partnerships may go through a Chapter 7 liquidation, but do not qualify for a general discharge from all remaining debts as natural persons do.

Wrong
C. Obtains a Chapter 7 discharge ten years previously.
A debtor may seek a discharge under Chapter 7, so long as he or she has not had a discharge in the previous eight years.

Question 3

Question #9 (AICPA.970512REG-BL)
Under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code, a debtor will be denied a discharge in bankruptcy if the debtor

A. Fails to list a creditor.

B. Owes alimony and child support payments.

C. Cannot pay administration expenses.

D. Refuses satisfactorily to explain a loss of assets.

Answer 3

D. Refuses satisfactorily to explain a loss of assets.

Generally, a bankrupt debtor, at the end of bankruptcy proceedings, will receive a discharge decree. Unless the debtor has committed an act such as fraud, intentional concealment of assets, refusal to explain the loss of assets, and the like, is a partnership or corporation, or the debtor has received a discharge decree within eight years of the current filing petition, the discharge decree will be granted. Here, the debtor has committed an act, has refused satisfactorily to explain a loss of assets, and as such will be denied a discharge decree in bankruptcy.

Wrong

A. Fails to list a creditor.

The mere failure to list a creditor is not an act to deny a discharge decree. It only removes the creditor from the bankruptcy proceedings.