R8

Question 1

What are the 6 types of bankruptcy?

Answer 1

1. Chapter 7 - Liquidation
2. Chapter 9 - municipal debt adjustment
3. Chapter 11 - Reorganzation
4. Chapter 13 - adjustments of debts of individuals with regular income
5. Chapter 15 - ancillary and other cross border cases

Question 2

What is Chapter 7 bankruptcy?

Answer 2

Liquidation - Trustee is appointed and if the debtor is a business, ceases to operate (Dissolved)

• If married, may file jointly
• If individual –> must pass means an abuse test (if income too high– converted to chapter 13)

Question 3

Define Chapter 11 bankruptcy

Answer 3

Reorganization.

No Trustee required

Debtor remains in possession of his or her assets and a plan of reorganization is adopted.

Business continues, assets are not liquidation, creditors are paid to the extent possible

Question 4

Define chapter 13 bankruptcy

Answer 4

Debt adjustment.

Trustee appointed, debtor or creditors come up with a 3-5 year repayment plan

Question 5

Chapter 15 bankruptcy

Answer 5

Cross-border case. Commenced by a “foreign representative” filing a petition for recognition

Question 6

Can a chapter 7 case be dismissed?

Answer 6

Yes

Question 7

Define a debtor

Answer 7

person who lives or has place of business in the USA is eligible

Debtor who is under chapter 7 may also be chapter 11

Question 8

Under Chapter 7 - what are the objections to discharge? (4)

Answer 8

aka reasons to deny a discharge of all debts -

• Debtor is not an individual
• Fraudulent transfers of property
• failed to keep adequate books and records
• received a prior discharge within 8 year

Question 9

Under Chapter 7 - what are the exceptions to discharge? (6)

Answer 9

Debts arising from:

1. Willful and malicious injury
2. Alimony
3. Fraud
4. Taxes
5. Educational loans
6. Debts

Question 10

Under chapter 7 - what are the 3 categories of distribution of debtors estate?

Answer 10

Secured claimants- paid first to the extent of the value of the collateral

Priority claimants - paid next by category

General creditors - Paid last

Question 11

Under chapter 7 - what are the priority claimants( 9)

Answer 11

Support obligations to spouse and children
Admin expenses
Gap claims (claims that accrued after a involuntary petition is filed and before an order for relief is entered)

Wage claims per employee up to $13,650 within 180 days of bankruptcy
EBP within 180 days prior to bankruptcy
Grain farmers & claims against storage/ processing facilities

Consumer deposits up to $3k
Tax claims
Injury (personal) claims from intoxicated rivers

Question 12

Who is liable in workers compensation?

Answer 12

Employers are Strictly liable regardless of fault as long as employees injury occurred while acting in the scope of employment

Question 13

What are the 6 different types of entities?

Answer 13

1. Sole proprietorship
2. General Partnership/ Joint Venture
3. Limited liability partnership
4. Limited partnership
5. LLC
6. Corporation

Question 14

Who is liable in workers compensation?

Answer 14

Employers are Strictly liable regardless of fault as long as employees injury occurred while acting in the scope of employment

Question 15

What are the 6 different types of entities?

Answer 15

1. Sole proprietorship
2. General Partnership/ Joint Venture
3. Limited liability partnership
4. Limited partnership
5. LLC
6. Corporation

Question 16

Summary of sole proprietor ship

Answer 16

• not considered legal entity separate form owner
• Unlimited liability to the single owner
• profit and losses on owners Schedule C
• no papers filed with the state to form

Question 17

What is the key difference between a joint venture and a general partnership?

Answer 17

Joint is formed for a single transaction or project(s)

Question 18

When is a partnership liquidated and what is the order of payouts?

Answer 18

Partnership is liquidated when it ceases to do a business

Pay out order:

1. Creditors (partners if creditors)
2. partners (first to return contributions then on account of profits)
3. Not enough to pay back –> shared equally

Question 19

Summary of Limited Liability Partnership

Answer 19

Partners are generally not liable for contracts of the partnership or acts of fellow partners, employees, or agents

• partners are liable for own negligence
• formation requires filing with state it is operating

Question 20

Summary of LLC

Answer 20

• run like corporation or partnership and taxed like a partnership
• member managed or manger managed
• owners (members) are not personally liable
• file with state, cant transfer ownership without consent of other members

Question 21

Under chapter 7 - what debt is discharged?

Answer 21

Secure claims are discharged

Question 22

Under Revised model business corporation act - what type of dividends is not defined as a distribution?

Answer 22

Stock dividends

Question 23

What type of party cannot be petitioned into involuntary petition?

Answer 23

Farmers and nonprofit

Question 24

What type of bankruptcy is a farmer unable to file under?

Answer 24

Chapter 9

Question 25

In a corporation - what voting rights do shareholders have?

Answer 25

Shareholders have the right to vote on all fundamental corporate changes including:

• amendments to the articles of incorporation
• elect an remove directors

Question 26

Define joint venture

Answer 26

Association of persons engaged as co-owners in a single undertaking of profit

Question 27

What are the 3 ways the corporate veil is peirced?

Answer 27

1. Commingling funds
2. inadequate capitalization at formation
3. fraud

Question 28

Under chapter 11 - What is necessary before the court may confirm a reorganization plan?

Answer 28

Plan must provide for the full payment of admin expenses

Question 29

If there is no partnership agreement - when can a partner withdraw?

Answer 29

At any time

Question 30

What is the business judgement rule?

Answer 30

Principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation