Section 2 Creditor - Debtor

Question 1

The purpose of a Chapter 11 bankruptcy is to restructure finances so the debtor can ____

Chapter 11 often restructures the ___of a large corporation. Creditors will take less but better that than a large corporation liquidating.

Chapter 11 is voluntary only T/F

Chapter 11 is primarily for Individuals. T/F

Answer 1

continue to operate the business

debt

False - can be involuntary too

False - primarily for biz. Too expensive for individuals, but they can still do it.

Question 2

The entry of the court’s final decree in a Chapter 11 Reorganization will generally ___the corporate debtor from all debts and liabilities that arose before ___, except as otherwise provided in the ___, the order of ___, or the ___Code

Answer 2

discharge, confirmation of the plan, plan, confirmation, Bankruptcy

Question 3

Douglas filed a voluntary bankruptcy on November 1, 20XX. For over a year prior to that time, Douglas had been considered insolvent in the bankruptcy sense. Which of the following would be considered a “preference” payment under bankruptcy law?

October 1, 20XX—Payment of $1,000 to a secured creditor on an overdue obligation (total obligation: $2,000)
September 1, 20XX—Purchase of a washer-dryer for $1,200 cash
May 1, 20XX—Payment to Douglas’ brother of $2,000 on an overdue unsecured loan
March 1, 20XX—Payment of $500 to First Bank on an overdue unsecured loan

Answer 3

May 1, 20XX—Payment to Douglas’ brother of $2,000 on an overdue unsecured loan

The payment to the secured creditor would not be considered a preference, since the secured creditor would have received that amount anyway upon liquidation of the security
The purchase of the washer-dryer for cash was not a preference, as it was a contemporaneous exchange, not the payment of a previously existing debt.
The payment to First Bank occurred more than 90 days prior to the date of bankruptcy, and therefore was not a preference.

Question 4

A “___” is a payment to a previously existing creditor within ___ days prior to the date of bankruptcy which gives that creditor an unfair advantage over similarly situated creditors.
If the creditor is an “insider,” such as a relative or business partner, the period of time is ___year(s).

Answer 4

preference, 90 days, 1 year

Preferential transfers: One creditor preferred over other creditors

Question 5

T/F
Real property is permanently attached to the land (i.e., an immovable), such as land, buildings, and growing tree

Perfection occurs when you file a ____. This tells ____ that you have priority of the collateral

Attachment occurs when a _____ is signed. This basically says that the creditor extends value and the debtor has possession of ____

Answer 5

true

Financing Statement, 3rd parties

security interest agreement , collateral.

Question 6

debtor may attempt to conceal or transfer property to prevent a creditor from satisfying a judgment. Which of the following actions will be considered an indication of fraudulent conveyance?

Debtor remaining in possession after conveyance
Secret conveyance
Debtor retains an equitable benefit in the property conveyed

Answer 6

All 3

Question 7

A ____ ___ is an interest in tangible or intangible personal property or fixtures that secures payment or performance of an obligation

Answer 7

security interest

Question 8

nder the Uniform Commercial Code (U.C.C.), to perfect a security interest, a creditor has ____days from the date of the sale of equipment to perfect the security interest by filing a ____

Answer 8

10, financing statement

Question 9

The holder of a PMSI in collateral other than inventory has priority over conflicting security interests in the same collateral if the PMSI is perfected either: (2)

Answer 9

a. at the time the debtor receives the collateral

b. within 10 days.

Question 10

On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper’s existing and after-acquired equipment. On June 21, Harper was petitioned involuntarily into bankruptcy under Chapter 7 of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern filed the financing statement. Which of the parties will have a superior security interest in the equipment?

The trustee in bankruptcy, because the filing of the financing statement after the commencement of the bankruptcy case would be deemed a preferential transfer
The trustee in bankruptcy, because the trustee became a lien creditor before Eastern perfected its security interest
Eastern, because it had a perfected purchase money security interest without having to file a financing statement
Eastern, because it perfected its security interest within the permissible time limits

Answer 10

Eastern, because it perfected its security interest within the permissible time limits (filed statement within 10 days)

Having filed within the 10-day limit, Eastern has a valid perfected security interest in the equipment and after-acquired equipment despite the fact that the bankruptcy was filed two days earlier.

Question 11

Under Chapter 11, the following are required: (t/f)

The filing of a reorganization plan
Confirmation of the reorganization plan by the court
Opportunity for each class of claims to accept the reorganization plan

Answer 11

True to all

Question 12

Railroad bankruptcy can only be in ch 7 bankruptcy

A Chapter 11 bankruptcy must end up with an ___plan.

Answer 12

false - only ch 11.

approved

Question 13

If this agreement was elicited by fraud on the part of the debtor (primary party), the surety remains liable unless the surety can show that the ____was aware of the fraud committed by the debtor.

Answer 13

creditor

Question 14

Defenses for Suretys/Guarantors: T/F
Being a minor
Creditor is aware of fraud
Creditor Modified debtor's contract
Personal Defnse

Answer 14

True
True
True
FALSE

Question 15

A “___” is a transfer made by a debtor within two years prior to the date of bankruptcy in which the debtor did not receive fair value in exchange for the asset.

The transferee must be aware of the insolvency of the transferor. T/F

Answer 15

fraudulent transfer

False - they dont have to know

Question 16

Ingot Corp. lent Flange $50,000. At Ingot’s request, Flange entered into an agreement with Quill and West for them to act as compensated co-sureties on the loan in the amount of $100,000 each. Ingot released West without Quill’s or Flange’s consent, and Flange later defaulted on the loan. Which of the following statements is correct?

Quill will be liable for 50% of the loan balance…. WHY

Answer 16

The release of one co-surety without the knowledge and consent of the debtor and other co-surety (without a reservation of rights) generally releases the other co-surety to the extent of the proportionate responsibility of the co-surety who was released.

Question 17

Grey Corp. sells computers to the public. Grey sold and delivered a computer to West on credit. West executed and delivered to Grey a promissory note for the purchase price and a security agreement covering the computer. West purchased the computer for personal use. Grey did not file a financing statement. Is Grey’s security interest perfected?

Yes, because it was perfected at the time of attachment… HOW?

Answer 17

West executed a security agreement creating a purchase money security interest (PMSI) in consumer goods; thus, automatic perfection occurred upon attachment of the security interest, without any further action such as filing a financing statement or possession being required.

Question 18

A ____ is a security interest taken or retained by the seller of the collateral to secure payment of all or part of the purchase price, or taken by a person who gives value to the debtor to enable him to acquire the collateral

Answer 18

purchase money security interest (PMSI)

Question 19

Security interest ____when it becomes enforceable against the debtor or against third parties with respect to the collateral

Answer 19

attaches

Question 20

There are three elements of attachment of a security interest, all of which must be present:

Answer 20

Debtor has a signed security agreement.
Creditor gives value to debtor
Debtor has rights to the colateral

Question 21

ich of the following rights does one co-surety generally have against another co-surety?

Reimbursement
Contribution

Answer 21

Contribution

When two or more sureties exist, a surety who has paid more than his or her agreed share is entitled to reimbursement from the co-surety in accordance with the surety contract. This right to receive payment from co-sureties is known as “contribution.”

Question 22

When two or more sureties exist, a surety who has paid more than his or her agreed share is entitled to reimbursement from the co-surety in accordance with the surety contract. This right to receive payment from co-sureties is known as “___.”

Answer 22

contribution

Question 23

Remedies of the guarantor or surety:
Reimbursement or indemnity: Get the ____to pay the guarantor or surety for the amount the guarantor or surety had to pay the creditor.

Subrogation: When the guarantor or surety discharges the principal debtor’s ___to the creditor, the guarantor or surety gets all the creditor’s rights regarding the obligation

Answer 23

debtor

obligation (the debtor now owes the surety/gurantor)

Question 24

what order are the following obligations paid after a secured creditor rightfully sells the debtor’s collateral after repossession?

Debt owed to any junior security holder
Secured party’s reasonable sale expenses
Debt owed to the secured party

Answer 24

2,3,1

Any amount remaining goes to the debtor

Question 25

A secured creditor wants to file a financing statement to perfect its security interest. Under the U.C.C. Secured Transactions Article, which of the following must be included in the financing statement?

A listing or description of the collateral
An after-acquired property provision
The creditor’s signature
The collateral’s location

Answer 25

Description of Collateral

Question 26

What must be included in the financing statement?

names of the\_\_\_
signed by the \_\_\_,
\_\_\_party's address,
debtor's \_\_\_address, and
a statement indicating the types, or describing the items of \_\_\_.

Answer 26

debtor and the secured party,
debtor (not the creditor)
secured 
mailing 
collateral

Question 27

Perfection can be used in 3 different ways

Perfection by ___ Alone
Perfection by ____
Perfection by Filing a ___ ___

Answer 27

Attachment
Possession
Financial Statement

Question 28

____is an additional act (after attachment) that may be required to make a security interest effective against third parties.

T/F: Perfection can be defeated in insolvency proceedings

Answer 28

Perfection

False

Question 29

Chapter 11 bankruptcy was revised under the 2005 Bankruptcy Reform Act. Some of the more material changes and additions include:

I. confirmation of a Chapter 11 plan of reorganization does not discharge an individual debtor.
II. the court can no longer use a “cram down” provision.
III. individual debtors must use assets acquired after the petition was filed as necessary in the reorganization plan.
IV. individuals are not allowed to use Chapter 11 and must instead rely upon Chapter 13.

Answer 29

I & III

The new change in Chapter 11 for individuals is that they are not discharged until the plan is completed, unless the court orders otherwise. Also, if individuals receive assets after they have filed bankruptcy, they must dedicate those assets to the reorganization plan and use them to that effect.

Question 30

What is a cram down provision? Can this still be used?

Answer 30

Cram down provision is where they confirm a reorganization plan over the objection of creditors if the plan is viable/equitable. Yes it can still be used.

Question 31

A Chapter 11 bankruptcy applies only to those who could be a debtor under ___ and railroads.

Answer 31

Chapter 7

Question 32

Jane took her watch to the jeweler in order to have it repaired. The jeweler did not agree to do the repair on credit and expected to be paid in cash when Jane returned to pick up her watch. If Jane refuses to pay for the watch:

the jeweler must still return the watch to Jane and then file suit for the amount due for the repairs.
the jeweler can recover based on his mechanic’s lien.
the jeweler will have an artisan’s lien on the watch whether or not he returns the watch to Jane.
the jeweler could sell the watch to satisfy the outstanding amount due for the repair.

Answer 32

the jeweler could sell the watch to satisfy the outstanding amount due for the repair.
If the debtor fails to pay for the work performed, the creditor can retain possession of the property and sell it in satisfaction of the lien.

Question 33

An___ is a common law security device whereby a creditor can recover for work done on personal property of the debtor.

If the lien holder returns the possession voluntarily, the lien ____

a ___ lien arises from the making of improvements to real property.

A ___lien is given to artisans, innkeepers, and common carriers to secure payment for services rendered

Answer 33

artisan’s lien

no longer exists

mechanic’s

common law

Question 34

Under the U.C.C. Secured Transactions Article, which of the following statements is correct concerning the disposition of collateral by a secured creditor after a debtor’s default?

A good faith purchaser for value and without knowledge of any defects in the sale takes free of any subordinate liens or security interests….WHY?

Answer 34

This is saying that if someone buys the repossessed materials, he will be able to keep it and nobody can come back and say they have a lien on it and its theirs.

Question 35

A ____ permits a creditor to collect a certain portion of a debtor’s wages every pay period.

Answer 35

writ of garnishment

Question 36

On February 28, Master, Inc., had total assets with a fair market value of $1,200,000 and total liabilities of $990,000. On January 15, Master made a monthly installment note payment to Acme Distributors Corp., a creditor holding a properly perfected security interest in equipment having a fair market value greater than the balance due on the note. On March 15, Master voluntarily filed a petition in bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. One year later, the equipment was sold for less than the balance due on the note to Acme. Master’s payment to Acme could: MCQ

not be set aside as a preferential transfer because Acme was over-secured.
be set aside as a preferential transfer because the fair market value of the collateral was greater than the installment note balance.

Answer 36

Not be set aside as ap referential transfer b/c acme was oversecured (over secured means not insolvent due to assets exceeding liabilities)

Question 37

Which of the following statements is correct with respect to the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code?

a. A trustee must always be appointed.
b. The debtor must be insolvent if the bankruptcy petition was filed voluntarily.
c. A reorganization plan may be filed by a creditor any time after the petition date.
d. The commencement of a bankruptcy case may be voluntary or involuntary.

Answer 37

a. Trustee isnt required for ch 11
b. Debtor doesn’t have to be insolvent
c. Reorganization plan may be filed by a CREDITOR only 120 DAYS AFTER the petition date
d. TRUE

Question 38

Which of the following defenses would a surety be able to assert successfully to limit the surety’s liability to a creditor?

A discharge in bankruptcy of the principal debtor
A personal defense the principal debtor has against the creditor
The incapacity of the surety
The incapacity of the principal debtor

Answer 38

The incapacity of the surety

The surety is not permitted to use defenses which are “personal” to the debtor, such as bankruptcy or incapacity. However, the surety is able to use the defense of his own incapacity.

Question 39

The surety is not permitted to use defenses which are “____” to the debtor, such as bankruptcy or incapacity. However, the surety is able to use the defense of his own incapacity.

Answer 39

personal

Question 40

If there are fewer than 12 creditors, any one creditor who is owed at least $____(unsecured) may file petition.

If there are 12 or more creditors, at least ___creditors (owed collectively at least $_____) must join in the petition

Answer 40

15,775

15,775, 3 creditors

Question 41

Which of the following conditions, if any, must a debtor meet to file a voluntary bankruptcy petition under Chapter 7 of the Federal Bankruptcy Code?

Insolvency
Three or more creditors
Pre-petition credit counseling

Answer 41

er the Bankruptcy Code: “A voluntary case…is commenced by the filing…of a petition…by…a debtor…”—no requirements are stated. Thus, neither insolvency nor a three-or-more-creditor rule is applicable to a voluntary petition under Chapter 7. Under the Bankruptcy Reform Act of 2005, before the debtor may file a petition, they must receive credit counseling.

Question 42

Are the following debts discharged by bankruptcy?
A debt obtained by false representation
Obligations resulting from breach of fiduciary duty
Embezzlements
Fraud/Illegal Activities/Fines
Student Loans
Debts that survived previous bankruptcy

Answer 42

NOPE

Question 43

hich of the following factors help determine whether an item of personal property is a fixture?

Degree of the item’s attachment to the property
Intent of the person who had the item installed

Answer 43

Both

Question 44

T/F
If the debtor was involved in any federal or state securities law violations or certain criminal acts within the past five years, there is no exemption regardless of the residency or domiciliary status of the debtor.

Answer 44

True

Question 45

The federal 2005 Bankruptcy Reform Act modified the so-called “homestead” exemptions utilized under state law in certain states. Generally, these exemptions allowed the debtor to protect equity in their home from creditors:

The revised requirement is being a resident for at least ____prior to filing a petition for bankruptcy relief.

If the debtor was involved in any federal or state securities law violations or certain criminal acts within the past five years, there is ___regardless of the residency or domiciliary status of the debtor.

Answer 45

2 yrs (730 days)

no exemption

Question 46

The filing of an involuntary bankruptcy petition under the Federal Bankruptcy Code:

a. terminates liens on exempt property.
b. terminates all security interests in property in the bankruptcy estate.
c. stops the debtor from incurring new debts.
d. stops the enforcement of judgment liens against property, except IRS, in the bankruptcy estate.

Answer 46

It doesn’t terminate the liens
Doesn’t terminate the security interests
Doesn’t stop the debtor from incurring new debts
TRUE

An involuntary bankruptcy petition, one filed by creditors of the bankrupt under the Federal Bankruptcy Code, places a freeze or “automatic stay” on further actions by creditors (i.e., stops the enforcement of judgment liens against property in the bankruptcy estate)

Question 47

An involuntary bankruptcy petition, one filed by creditors of the bankrupt under the Federal Bankruptcy Code, places a freeze or “____” on further actions by creditors (i.e., stops the enforcement of judgment liens against property in the bankruptcy estate)

Answer 47

automatic stay

Question 48

Under the Secured Transactions Article of the U.C.C., all of the following are needed to create an enforceable security agreement except:

authentication by the debtor.
possession for purposes of security.
identifying the collateral.
filing a financing statement.

Answer 48

Filing a F/S

A financing statement is filed to give public notice of a security interest, not the security agreement.

Question 49

A financing statement is filed to give public notice of the ___. ___ are deemed to know it exists even if they do not have actual knowledge.

Answer 49

security interest, Third Parties

Question 50

Drew bought a computer for personal use from Hale Corp. for $3,000. Drew paid $2,000 in cash and signed a security agreement for the balance. Hale properly filed the security agreement. Drew defaulted in paying the balance of the purchase price. Hale asked Drew to pay the balance. When Drew refused, Hale peacefully repossessed the computer.

Under the U.C.C. Secured Transactions Article, which of the following remedies will Hale have?

Obtain a deficiency judgment against Drew for the amount owed…..WHY

The secured party may take possession of the collateral either by judicial process or without judicial process if it can be done without a breach of the peace. T/F

Answer 50

Assuming that proper procedures are followed, a creditor may later obtain a deficiency judgment against the debtor if the sale of the collateral did not generate sufficient funds to pay the indebtedness in full.

True

Question 51

A compensated surety is always totally released if the debtor ___performance

Answer 51

tenders

Question 52

Which of the following acts will always result in the total release of a compensated surety?

The creditor changes the manner of the principal debtor’s payment.
The creditor extends the principal debtor’s time to pay.
The principal debtor’s obligation is partially released.

Answer 52

NONE

A changing of the manner of payment or an extension of the debtor’s time to pay would operate as a release only if these changes in the contract were deemed to be material.

A partial release of the debtor will release the surety only to the extent of the amount of the debt released.

Question 53

Burn Manufacturing borrowed $500,000 from Howard Finance Co., secured by Burn’s present and future inventory, accounts receivable, and the proceeds thereof. The parties signed a financing statement that described the collateral and it was filed in the appropriate state office. Burn subsequently defaulted in the repayment of the loan and Howard attempted to enforce its security interest. Burn contended that Howard’s security interest was unenforceable. In addition, Green, who subsequently gave credit to Burn without knowledge of Howard’s security interest, is also attempting to defeat Howard’s alleged security interest. The security interest in question is valid with respect to:

both Howard and Green.
Howard but NOT green

Answer 53

Both Howard & Green

Howard has rights towards Burn the debtor (1. written financing statement, 2. Howard gave $500,000, and 3. Burn has rights to the inventory and AR). Since there are two creditors, the first creditor to perfect has priority (Howard perfected first).

Question 54

The issue of ____is important when several creditors claim interests in the same collateral.

If no security interests have been perfected, the interests have priority based upon the order in which they attached to the ___.

Answer 54

priority

Collateral

Question 55

Thomas filed a voluntary petition for bankruptcy on July 1, 20X1. As part of the petition, Thomas listed his assets, which include his permanent residence. The residence, which was recently appraised for $125,000, is subject to a mortgage in favor of Security Finance in the amount of $100,000. Assuming that Thomas properly claims a homestead exemption under the federal exemptions, he will be entitled to an exemption in the amount of:

`$7,500.
$23,675.
$25,000.
$125,000.

Answer 55

23,675

; the federal homestead exemption is $23,675. If you are married and filing jointly, you may double all of the federal bankruptcy exemptions.

Question 56

An individual client asks a CPA to determine whether the client is solvent for federal tax purposes. The client has assets consisting of cash and marketable securities with a basis of $250,000 and a fair market value of $155,000. The client has liabilities of $175,000, which include $130,000 of nondischargeable liabilities under the Bankruptcy Code. Which of the following statements is correct?

The client is insolvent since the client’s liabilities exceed the fair market value of the client’s assets by $20,000.
The CPA is unable to determine whether the client is solvent or insolvent because the CPA is not an accredited appraiser.
The client is solvent because the fair market value of the client’s assets exceeds the client’s nondischargeable debt by $25,000.
The client is solvent because the basis of the client’s assets totals $250,000 and exceeds the client’s liabilities by $75,000.

Answer 56

The client is insolvent since the client’s liabilities exceed the fair market value of the client’s assets by $20,000.

“Insolvent” means that liabilities exceed the fair market value of assets.

Question 57

“___” means that liabilities exceed the fair market value of assets.

The taxpayer’s insolvency is measured by how much the liabilities exceed the fair market value of the assets right before the discharge T/F

Answer 57

Insolvent

True

Question 58

On May 1, Year 5, two months after becoming insolvent, Quick Corp., an appliance wholesaler, filed a voluntary petition for bankruptcy under the provisions of Chapter 7 of the Federal Bankruptcy Code. On October 15, Year 4, Quick’s board of directors had authorized and paid Erly $50,000 to repay Erly’s April 1, Year 4, loan to the corporation. Erly is a sibling of Quick’s president. On March 15, Year 5, Quick paid Kray $100,000 for inven­tory delivered that day.

Quick’s payment to Kray would:

not be voidable, because it was a contemporaneous exchange….WHY

Answer 58

A contract may be voidable on the grounds of fraud, misrepresentation, mistake, duress, lack of capacity, undue Influence, or abuse of a fiduciary relationship. Since Quick paid and received the inventory the same day, it is not voidable. If Quick had paid for the inventory and anticipated delivery at a later date, Quick may have had a voidable contract.

Question 59

There are five general requirements, all of which must be present for the trustee to void a potential transfer:

Transfer goes to a __
It must be in payment for a previous ___ owed by the debtor.
It must have been made while the debtor was ___
It must have been made within __ days of filing the petition (__year(s) if the creditor was an insider or had reason to think the debtor was insolvent). An insider is someone with a special relation to the debtor—for example, a relative or a partner.
The creditor got ___than they would have received had the transfer not been made (usually considered to be the creditor’s share of a Chapter 7 liquidation).

Answer 59

creditor.
debt 
insolvent.
90, 1 year
more

Question 60

The revised U.C.C. Article 9 specifies that a financing statement must be filed for ____in order to provide constructive notice of the security interest.

Answer 60

personal property

Question 61

Creditors of Walters filed an involuntary petition of bankruptcy on May 15, 20XX. After all nonexempt property was sold and secured creditors paid, there remained $6,000 to pay other creditors. Walters’ other creditors consisted of the following: trustee ($4,000), attorney for the petitioner ($4,000), accountant for the estate ($2,000), and other general creditors ($10,000).

Under the federal system of priorities, what is the amount that will be received by the accountant for the estate?

$0
$1,200
$1,500
$2,000

Answer 61

The accountant for the estate is a priority one creditor, along with the trustee and the attorney for the petitioner. Priority creditors are entitled to be paid in full before lower level priority creditors and general creditors are paid. If there are insufficient funds to pay a level of priority creditors, they are paid pro-rata.

(2k/(4k+4k+2k))*6k

Question 62

Who are priority one creditors?

Answer 62

Trustee/Attorney/Accountant for the petitioner

Question 63

A company that has filed a Chapter 11 bankruptcy petition intends to pay an insider key employee an inducement to remain with the company. The average amount of similar payments made to nonmanagement employees will be $35,000 in the same calendar year. Which of the following annual monetary incentives can be paid to this employee?

$335,000…WHY

Answer 63

Businesses who file Chapter 11 may make payments to key employees (known as “pay to stay” or a KERP (key employee retention plan)

IRC Section 503(c) places limitations on the amount of such payments, the person is not greater than an amount equal to 10 times the amount of the average amount given to nonmanagement employees.

For this question, payments cannot exceed $350,000 ($35,000 × 10), so only the answer choice of $335,000 would qualify.

Question 64

Under the Secured Transactions Article of the U.C.C., which of the following security agreements does not need to be in writing to be enforceable?

A security agreement collateralizing a debt of less than $500
A security agreement where the collateral is highly perishable or subject to wide price fluctuations
A security agreement where the collateral is in the possession of the secured party
A security agreement involving a purchase money security interest

Answer 64

A security agreement where the collateral is in the possession of the secured party

When the secured party can take possession of the collateral as part of the security agreement, the agreement is enforceable without writing.

A security agreement collateralizing a debt under $500, where the collateral is highly perishable or subject to wide price fluctuations, or involving a purchase money security interest (PMSI) must be in writing.

Question 65

There are items that cannot be taken control of by the bankruptcy trustee. These items are often known as exempt property. The 2005 Bankruptcy Reform Act tightened up the exemption of “household goods and furnishings” by specifically excluding which of the following from the “household goods and furnishings” term?

Works of art, such as paintings and sculptures
Antiques in the home valued over $650
Wedding rings
Lawn mowers, tractors, and similar yard items

Answer 65

I, II, and IV only

Question 66

Which of the following acts by a debtor could result in a bankruptcy court revoking the debtor’s discharge?

Failure to list one creditor
Failure to correctly answer material questions on the bankruptcy petition

Answer 66

Second one only.

Question 67

Discharge will generally be given unless the individual debtor did any of the following within one year prior to filing or during the bankruptcy proceedings:

a. Destroyed or concealed ___in order to defraud creditors
b. Destroyed, falsified, or concealed ___
c. Failed to cooperate (lied, withheld information, made false claim)
d. Refused to obey ___
e. Refused to ___in answering questions approved by the court

Answer 67

property
records
Order of court
testify

Question 68

On March 1, Green went to Easy Car Sales to buy a car. Green spoke to a salesperson and agreed to buy a car that Easy had in its showroom. On March 5, Green made a $500 down payment and signed a secu­rity agreement to secure the payment of the balance of the purchase price. On March 10, Green picked up the car. On March 15, Easy filed the security agreement. On what date did Easy’s security interest attach?

Answer 68

March 5th

Before a security interest attaches, there must be a security agreement (oral or written) between the debtor and the secured party, the secured party must give value, and the debtor must have rights in the collateral. Green gave value ($500) and signed a security agreement on March 5.

Question 69

Which of the following prejudgment remedies would be available to a creditor when a debtor owns no real property?

Both a writ of attachment and garnishment… WHY

A writ of attachment will require a court order … T/F
A writ of garnishment will require a court order … T/F

Answer 69

An unpaid creditor may seek a court order requiring the debtor’s assets be seized and held to satisfy an unpaid obligation. This may include both a garnishment of the debtor’s wages, as well as a writ of attachment over the debtor’s property. The writ of attachment may encompass both real and personal property. In this case, the fact that the debtor owns no real property will not prevent the creditor from obtaining a writ of attachment over his personal property.

True
False

Question 70

Under the 2005 Bankruptcy Reform Act, the clerk of the bankruptcy court must provide a consumer-debtor with which of the following materials or services?

___notice of the costs, purpose, and benefits of each form of ___

Does the clerk impose the court educational responsibilities?

The clerk must provide a description of the types of services available from ______ agencies

Answer 70

Written, bankruptcy

No educational responsibilities

Credit Counseling

Question 71

all information supplied by a debtor in connection with a bankruptcy case is subject to examination by the ____

Answer 71

attorney general

Question 72

he Federal Fair Debt Collection Practices Act prohibits a debt collector from engaging in unfair practices. Under the Act, a debt collector generally can be prevented from:

contacting a third party to ascertain a debtor’s location.
continuing to collect a debt.
communicating with a debtor who is represented by an attorney.
commencing a lawsuit to collect a debt.

Answer 72

communicating with a debtor who is represented by an attorney.

Question 73

he Federal Fair Debt Collection Practices Act prohibits a debt collector from engaging in unfair practices. Under the Act, a debt collector generally can be prevented from:

debtors may not be contacted at inconvenient ___,
debtors cannot be contacted at their place of __,
creditors cannot continue to contact a debtor who has expressed in ___that he wants no more contact (they must use other methods to continue to collect),
if notified of the fact that the debtor has retained an attorney, the creditor must contact the ___only,
creditors may not harass or abuse debtors, and
collectors may not misrepresent their affiliations or any actions they may take.

Answer 73

times
employment
writing
attorney

Question 74

Which of the following types of claims would be paid first in the distribution of a bankruptcy estate under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code if the petition was filed July 15, 20X1?

A secured debt properly perfected on March 20, 20X1
Inventory purchased and delivered August 1, 20X1
Employee wages due April 30, 20X1
Federal tax lien filed June 30, 20X1

Answer 74

Secured debt properly perfected on March 20, 20X1

A perfected secured debt whose perfection pre-dates employee wage and federal tax lien claim dates has priority in distribution of a bankruptcy estate under Chapter 7. Similarly, post-petition claims for inventory purchases will be secondary to the perfected pre-petition secured debt.

Question 75

A perfected secured debt whose perfection pre-dates ___and____claim dates has priority in distribution of a bankruptcy estate under Chapter 7. Similarly, post-petition claims for ___purchases will be secondary to the perfected pre-petition secured debt.

Answer 75

employee wage, federal tax lien , inventory

Question 76

The claim of a secured creditor to the debtor’s property has priority to the claims of all ___creditors.

Answer 76

unsecured

Question 77

a security interest that has not attached? It is not effective against either the ____ or ___ .

Answer 77

debtor or third parties

Question 78

Under the Secured Transaction Article of the U.C.C. (Article 9), which of the following remedies is available to a secured creditor when a debtor fails to make a payment when due?

Proceed against the collateral
Obtain a general judgment against the debtor

Answer 78

BOTH

Proceed against collateral via repo

Question 79

The ____- applies almost exclusively to the sale of goods and is designed to liberalize the way merchants do business while protecting the consumer.

Answer 79

Uniform Commercial Code

Question 80

Is the IRS given priority when it comes to the distribution of payouts to creditors?

Answer 80

Yes

Question 81

___, such as debt arising from the purchase of inventory, is not covered by the Fair Debt Collection Practices Act (FDCPA).

t/f The Fair Debt Collection Practices Act (FDCPA) regulates the collection of consumer debt. Consumer debt is defined as debt that arises for personal, family, or household purposes.

Answer 81

Commercial debt

true

Question 82

The rules of the Fair Debt Collection Practices Act (FDCPA) do not apply to ___collecting ____

Answer 82

Original creditors, their own debts.

Question 83

Which one is more priority

IRS or Alimony

Answer 83

Alimony

Question 84

Superior Interest Means what?

Answer 84

Superior interest means you have priority over someone else. Example: I perfect by filing a finacing statement on a box of shoes. I have superior interest over everyone after today.

Question 85

Which of the following transfers by a debtor, within 90 days of filing for bankruptcy, could be set aside as a preferential payment?

Making a gift to charity
Paying a business utility bill
Borrowing money from a bank secured by giving a mortgage on business property
Prepaying an installment loan on inventory

Payments made in the ordinary course of business are/are not preferential

Answer 85

Prepaying installment loan on inventory.

A preferential transfer is any payment made by the debtor to or for the benefit of a creditor for an antecedent(pre-existing) debt within 90 days before a filing for bankruptcy that gives to the creditor more assets than it would have received under the bankruptcy proceeding.

are not

Question 86

The debtor’s estate includes certain after-acquired property. Specifically, the estate includes any type of property that the debtor acquires, or becomes entitled to acquire, within 180 days after the petition filing date:

a. by ___,
b. as a beneficiary of a ___ policy, or
c. as the result of a ___decree or a ____settlement agreement with the debtor’s spouse.
d. ___ interest

Answer 86

inheritance
life insurance
divorce , property – NOTE: NOT ALIMONY
Municipal bond

Question 87

Which of the following actions between a debtor and its creditors will generally cause the debtor’s release from its debts?

Composition of creditors
Assignment for the benefit of creditors
Both composition of creditors and assignment for the benefit of creditors
Neither composition of creditors nor assignment for the benefit of creditors

Answer 87

Composition of creditors

In a composition agreement, a debtor enters into an agreement with his creditors whereby the debtor agrees to pay the creditors some fraction of the amount of the outstanding debt. Such an agreement discharges the debtor once the debt is actually paid.

An assignment for the benefit of creditors is a transfer by the debtor of all of his assets to a trustee,

Question 88

In a ____agreement, a debtor enters into an agreement with his creditors whereby the debtor agrees to pay the creditors some fraction of the amount of the outstanding debt. Such an agreement discharges the debtor once the debt is actually paid.

An ____for the benefit of creditors is a transfer by the debtor of all of his assets to a trustee,

Answer 88

composition

assignment

Question 89

Under the Uniform Commercial Code (U.C.C.) Secured Transactions Article, perfection of a security interest in a negotiable instrument is achieved only by the creditor taking ____of the instrument.

Answer 89

possession

Question 90

ASSIGNMENTS
An assignment for the benefit of creditors is a transfer by the debtor of all of his assets to a trustee,

Does this involve the consent of creditors?
Will the debtor be released from liability?

Any agreement under which partial payments will release the debtor from further liability must be made between the debtor and the creditors. The trustee has no such power. T/F

Answer 90

Does not involve consent.
Debtor will not be released from liability

True

Question 91

The bankruptcy court may dismiss a voluntary bankruptcy petition for several reasons. These include:

a. unreasonable ___by the debtor that is prejudicial to creditors,
b. __of any fees or charges,
c. failure of the debtor to file required ___ and information within required time periods,
d. the debtor has ___ above the average median family ____for the state where the bankruptcy petition is filed,
e. the debtor fails to pay post-petition ___ or ___ ,
f. the debtor was convicted of a ____and the victim files a motion to dismiss the petition, or
g. the debtor was convicted of a ___ and the ___files a motion to dismiss the petition.

Answer 91

delay 
nonpayment 
documents 
income 
alimony, child support
drug trafficking crime 
violent crime, victim

Question 92

Queen paid Pax & Co. to become the surety on a loan which Queen obtained from Squire. The loan is due and Pax wishes to compel Queen to pay Squire. Pax has not made any payments to Squire in its capacity as Queen’s surety. Pax will be most successful if it exercises its right to:

reimbursement (indemnification).
contribution.
exoneration.
subrogation.

Answer 92

Exoneration allows the sureties to sue the original debtor to pay the creditor. This will take the liability out of the sureties’ responsibilities.

Question 93

______: Get the principal debtor to pay the guarantor or surety for the amount the guarantor or surety had to pay the creditor.

______: When the guarantor or surety discharges the principal debtor’s obligation to the creditor, the guarantor or surety gets all the creditor’s rights regarding the obligation.

______: From co-guarantor or co-sureties for paying more than legally obligated.

Answer 93

Reimbursement or indemnity

Subrogation

Contribution

Question 94

The trustee must handle all of the affairs of the estate. The trustee may perform these duties itself or hire professionals to perform these duties. It may receive fees for its capacities as both ____.

Answer 94

trustee and preparer

Question 95

the____is elected by the creditors at a creditor’s meeting.

The trustee is paid from the ___

The trustee can not sue and be sued as trustee.

Answer 95

permanent trustee

estate.

False - yes they can

Question 96

the____is elected by the creditors at a creditor’s meeting.

The trustee is paid from the ___

The trustee can not sue and be sued as trustee.

The trustee can employ attorneys, accountants, appraisers, and other individuals with ____

Answer 96

permanent trustee

estate.

False - yes they can

prior court approval.

Question 97

Which of the following rights does a surety have?

Right to compel the creditor to collect from the principal debtor
Right to compel the creditor to proceed against the principal debtor’s collateral

Answer 97

Neither

The surety becomes liable on an outstanding debt immediately upon the default of the principal debtor. The surety does not have the right to compel the creditor first to seek remedy (i.e., collect) from the principal debtor or to force the creditor first to proceed against the debtor’s collateral.

Question 98

Under the Federal Fair Debt Collection Practices Act, which of the following would a collection service using improper debt collection practices be subject to?

Civil Lawsuit – WHY?

Answer 98

b/c stone cold said so

Question 99

Which of the following would change if an asset is treated as personal property rather than as real property?

Requirements for transfer
Creditor’s rights

A deed is required for ____to be transferred, while _ _does not require a deed

Answer 99

Both requirements for transfer and creditor’s rights would change if an asset is treated as personal property rather than as real property.

real property , Personal Property

Question 100

The financing statement is legally sufficient if it contains:

name, address, and signature of the debtor T/F
name and address of the creditor (the secured party), and T/F
a statement indicating the types or describing the items of collateral. T/F

Answer 100

True

Question 101

The attorney for the debtor in a Chapter 7 bankruptcy has certain specified obligations, including:

a. filing an ___ with the bankruptcy court stating that they have informed the debtor of the various forms of __ and their details and
b. reasonably ___ the information contained in the ___ and the supporting schedules.

Answer 101

affidavit, bankruptcy

verifying, bankruptcy petition

Question 102

Which of the following transactions would illustrate a secured party perfecting its security interest by taking possession of the collateral?

A pawnbroker lending money
A bank receiving a mortgage on real property

Answer 102

Pawnbroker – they take possession

Question 103

SECURED TRANSACTIONS

The creditor must sue the debtor in any secured transaction.

Answer 103

False

If the debt is not paid, the creditor can sell the personal property and apply the proceeds to the unpaid debt; the creditor need not go to court

Question 104

Debt collectors are prohibited from doing all of the following except:

provide written verification of the debt.
communicate with a third party by postcard.
disclose in correspondence that the sender is in the debt collection business.
identify the debt collector’s employer unless expressly requested.

Answer 104

provide written verification of the debt.

Question 105

Robin Corp. incurred substantial operating losses for the past three years. Unable to meet its current obligations, Robin filed a petition for reorganization under Chapter 11 of the Federal Bankruptcy Code. Which of the following statements is correct?

The creditors’ committee must select a trustee to manage Robin’s affairs.
The reorganization plan may only be filed by Robin.
A creditors’ committee, if appointed, will consist of unsecured creditors.
Robin may continue in business only with the approval of a trustee.

Answer 105

A creditors’ committee, if appointed, will consist of unsecured creditors.

Trustees are NOT required for CH 11.
Reorganization is voluntary/involuntary

Question 106

Wine purchased a computer using the proceeds of a loan from MJC Finance Company. Wine gave MJC a security interest in the computer. Wine executed a security agreement and financing statement, which was filed by MJC. Wine used the computer to monitor Wine’s personal investments. Later, Wine sold the computer to Jacobs, for Jacobs’s family use. Jacobs was unaware of MJC’s security interest. Wine now is in default under the MJC loan. May MJC repossess the computer from Jacobs?

Yes, because MJC’s security interest was perfected before Jacobs’s purchase…. WHY

Answer 106

The filing of the financing statement is to give public notice of MJC’s security interest. Third parties are deemed to know of the security interest even if they do not actually have knowledge. MJC may repossess the computer. Jacobs’s intended use is of no consequence. Jacobs has no personal liability.

Question 107

What is the foundational document of the bankruptcy law?

Answer 107

The United States Constitution

Question 108

what secured transaction document must be signed by the debtor?

Answer 108

Security Agreement

Question 109

Under Chapter 7 of the Federal Bankruptcy Code, what effect does a bankruptcy discharge have on a judgment creditor when there is no bankruptcy estate?

The judgment creditor’s claim is nondischargeable.
The judgment creditor retains a statutory lien against the debtor.
The debtor is relieved of any personal liability to the judgment creditor.
The debtor is required to pay a liquidated amount to vacate the judgment.

Answer 109

The debtor is relieved of any personal liability to the judgment creditor.

Question 110

Before a person may file a petition for voluntary bankruptcy under the 2005 Bankruptcy Reform Act, the petitioner must:

receive credit counseling from an approved for-profit credit counseling agency.
receive credit counseling within 180 days preceding the filing.
provide a certificate of receiving a group or individual briefing by an approved credit agency within the last 180 days to the court.

Answer 110

II and III only

There is a requirement under the 2005 Act that the person receive credit counseling within 180 days preceding the filing.

The answer regarding credit counseling is incorrect because the counseling must come from an approved not-for-profit agency, not a for-profit agency. Careful reading is important!

Question 111

The trustee steps into the shoes of the debtor and has:

strong-arm power, or___ over an unperfected secured party to the debtor’s property,
the power to require persons holding the debtor’s property at the time the petition is filed to ___,
specific powers of ____, or the ability to set aside a sale or transfer to take the debtor’s property back, and
the ability to use any ____ to the debtor to insure the return of the debtor’s property.

Answer 111

priority
deliver the property to the trustee
avoidance
grounds available

Question 112

T/F
The trustee can avoid certain statutory liens against the debtor’s property

A ____ (lien) is a non-possessory lien on real property is a security interest given to a creditor.

___ and ____ s liens on property have priority over
mortgages.

Mortgages should be ____ to give other parties notice. An ____mortgage has no effect on a subsequent third-party purchaser, but will preserve the creditor’s mortgage against the claims of ____for value.

Answer 112

True

mortgage

Tax liens and mechanic’

recorded, unrecorded, subsequent bona fide purchasers

Question 113

Rich purchased property from Sklar for $200,000. Rich obtained a $150,000 loan from Marsh Bank to finance the purchase, executing a promissory note and a mortgage. By recording the mortgage, Marsh protects its:

rights against Rich under the promissory note.
rights against the claims of subsequent bona fide purchasers for value.

Answer 113

rights against the claims of subsequent bona fide purchasers for value.

Question 114

Chapter 9 bankruptcy is available only to ___

Can farmers use CH 9?

Answer 114

municipalities.

NO

Question 115

Sorus and Ace have agreed, in writing, to act as guarantors of collection on a debt owed by Pepper to Towns, Inc. The debt is evidenced by a promissory note. If Pepper defaults, Towns will be entitled to recover from Sorus and Ace unless:

Towns has not attempted to enforce the promissory note against Pepper.

Answer 115

he creditor must first attempt to collect from Pepper before guarantors

Question 116

Which of the following events will follow the filing of the Chapter 7 involuntary petition?

A trustee will be appointed.
A stay against creditor collection proceedings will go into effect.

Answer 116

Both I and II

The bankruptcy judge will order a stay preventing individual creditors from initiating their own collection proceedings

The filing of the petition stays all pending actions by creditors against the debtor.

Question 117

If the debtor contests the involuntary petition, the creditors must prove either of the following:

a. The debtor has not been paying debts as they come due.
b. The debtor’s property has been placed in a receivership or an assignment for the benefit of creditors within 120 days before the involuntary petition was filed.

Answer 117

Yeppp

Question 118

However, a ___or a commodity ___is prohibited from filing under Chapter 11 and is restricted to Chapter 7 bankruptcy.

Answer 118

stockbroker . broker

Question 119

r the U.C.C. Secured Transactions Article, what is the order of priority for the following security interests in store equipment?

Security interest perfected by filing on April 15, Year 4
Security interest attached on April 1, Year 4
Purchase money security interest attached April 11, Year 4, and perfected by filing on April 20, Year 4

Answer 119

3,1,2

Item III, a purchase money security interest, has priority over nonpurchase money securities when perfected within 20 days of attachment. Item I has priority over item II because it was perfected. Item II was not perfected.

Question 120

a ___, has priority over nonpurchase money securities when perfected within ___days of attachment

Answer 120

purchase money security interest (PMSI), 20

Question 121

Under the Uniform Commercial Code (U.C.C.) Secured Transactions Article, if a debtor is in default under a payment obligation secured by goods, the secured party has the right to:

peacefully ____the goods without judicial process,
reduce the claim to a ___, and
___the goods and apply the ___toward the debt.

Answer 121

repossess,
judgment
sell, proceeds

Question 122

Which of the following statements is (are) correct regarding debtors’ rights?

State exemption statutes prevent all of a debtor’s personal property from being sold to pay a federal tax lien.
Federal Social Security benefits received by a debtor are exempt from garnishment by creditors.

Answer 122

II ONLY

. Federal law does not exempt all kinds of personal property from seizure (although some forms of personal property may be exempt). Federal law does exempt Social Security benefits from garnishment.

Question 123

Which of the following is the best description of attachment of a security interest?

A general statement that there is a security interest
A statement given by the secured party
A statement given by the debtor
A statement that attaches to certain property

Answer 123

A statement that attaches to certain property

The security interest attached to certain property because the secured party and the debtor must have a statement that says it does.

Question 124

Which of the following defenses by a surety will be effective to avoid liability?

Lack of consideration to support the surety undertaking

Answer 124

Doesn’t say why

Question 125

What bonds are an Obligation to a surety?

Answer 125

Common-Law Bond
Statutory Bond
Construction Bond
Fidelity Bond
Official Bond
Judicial Bond (bail/appeal/attachment bond)

Question 126

Defintions of the folloiwng

Common-Law Bond
Statutory Bond
Construction Bond
Fidelity Bond
Official Bond
Judicial Bond

Answer 126

Common-Law Bond - No law requires them
Statutory Bond - required by statute
Construction Bond - Performance
Fidelity Bond - Indemnifies employer (surety gets subrogation)
Official Bond - Required for public officials that have custody of public funds
Judicial Bond - Indemnifies other party against damages

Question 127

A party involuntarily petitioned into bankruptcy under Chapter 7 of the Federal Bankruptcy Code who succeeds in having the petition dismissed could recover:

___costs and ____’ fees,
___damages, and
___damages.

Answer 127

court , attorney
Compensatory
Punitive

Question 128

When a principal debtor defaults and a surety pays the creditor the entire obligation, which of the following remedies gives the surety the best method of collecting from the debtor?

Answer 128

Subrogation

When the guarantor or surety discharges the principal debtor’s obligation to the creditor, the guarantor or surety gets all the creditor’s rights regarding the obligation.

Question 129

Transfers by the debtor can be voided by the trustee if made as follows:

Transfers by the debtor can be voided by the trustee if made within____of filing with actual intent of defrauding creditors.

Within two years of filing, and the debtor received much less than an __ exchange AND(3)

was ___
Left an unreasonable small amount of ___
Believed debts would be beyond ability to ___

Answer 129

two years

equal

Insolvent
Capital
repay

Question 130

A Chapter 13 bankruptcy applies only to an ___

CH 13 is voluntary//involuntary

Chapter 13 bankruptcy requires/doesnt require a trustee

CH 13 can/cant convert to CH 7

cH 13 must end up with what

Answer 130

individual (or individual and spouse)

Voluntary

Requires

Can convert

Approved plan

Question 131

Under the Bankruptcy Reform Act of 2005 as adjusted by the indexing provisions, employees have priority status for wages earned within the prior ___ days, up to a maximum of $____ (indexed for inflation). In this case, the employee is given priority status for the full amount of wages earned ($3,000).

Answer 131

180, 12,850

Question 132

Dave owes debts of $3,000 to Al, $2,000 to Bob, and $1,000 to Chad. Dave offers to settle the claims by paying $1,500 to Al, $1,000 to Bob, and $500 to Chad. If Al, Bob, and Chad agree to accept Dave’s offer:

the agreement would be ___since there is sufficient consideration for the promises of the creditors to forgive the balance of their claims.

Answer 132

enforceable

Question 133

Dart, Inc., a closely held corporation, was petitioned involuntarily into bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. Dart contested the petition.

Dart has not been paying its business debts as they became due, has defaulted on its mortgage loan payments, and owes back taxes to the IRS. The total cash value of Dart’s bankruptcy estate after the sale of all assets and payment of administration expenses is $100,000.

Which of the following statements would correctly describe the result of Dart’s opposing the petition?

Dart will win because the petition should have been filed under Chapter 11.
Dart will lose because it is not paying its debts as they become due.

Answer 133

Dart will lose because it is not paying its debts as they become due.

Doesn’t matter if a corporation does CH 7 or CH 11

Question 134

Which of the following liens generally requires the lienholder to give notice of legal action before selling the debtor’s property to satisfy the debt?

Mechanic’s lien
Artisan’s lien

Answer 134

Both

. In order to enforce these statutory liens, the lienholder is required to give notice of impending legal action before selling the debtor’s property.

Question 135

Mechanic’s liens and artisan’s liens are liens created by statute for the benefit of creditors who have rendered services associated with specific property. In order to enforce these statutory liens, the lienholder is required to give notice of impending legal action before selling the debtor’s property. Notice exists in multiple capacities and may include any of the following:

Mail
Putting a notice on the ___ or a ___ __ near the courthouse door
Publish in the ___
Posting a sign at the ____ ___

Answer 135

Courthouse, Bulletin Board
Newspaper
Worker’s business

Question 136

The debtor in a proceeding under Chapter 7/11 CANNOT be any of the following:

a. A railroad
b. An insurance company
c. A domestic bank
d. Any other lending institution (like a credit union or a savings and loan association)
e. A governmental unit

Answer 136

Yeppp

Question 137

Noninventory goods were purchased and delivered on June 15, 20X1. Several security interests exist in these goods. Which of the following security interests has priority over the others?

Security interest in future goods attached June 10, 20X1
Security interest attached June 15, 20X1
Security interest perfected June 20, 20X1
`

Answer 137

Purchase money security interest perfected June 24, 20X1

a purchase money security interest (PMSI) in noninventory (e.g., equipment) takes priority over all other competing security interests in the same collateral if the PMSI is perfected by filing a financing statement properly within a 10-day grace period, that is, within 10 days after June 15, 20X1.

Question 138

Green owes unsecured creditors: Rice, $5,000; Vick, $3,000; Young, $8,500; and Zinc, $2,750. Green has not paid any creditor since January 1, 20X1. On March 15, 20X1, Green’s sole asset, a cabin cruiser, was seized by Xeno Marine Co., the holder of a perfected security interest in the boat. On July 1, 20X1, Rice, Vick, and Young petitioned Green into involuntary bankruptcy under Chapter 7 of the Federal Bankruptcy Code. If Green opposes the involuntary petition, the petition will be:

upheld, because the 3 filing creditors are owed more than $15,775.

Answer 138

Green opposes the involuntary petition, the petition will be upheld because the three filing creditors are owed more than $15,775 of unsecured debt. The key term is “involuntary bankruptcy.” An involuntary bankruptcy petition may be filed by any three or more creditors whose aggregate claims total at least $15,775 if there are more than 12 creditors. If there are fewer than 12 creditors, then any one or more of them may file when their aggregate claims total at least $15,775.

Question 139

The ___of the surety by the creditor of the release of collateral will release the surety to the extent that it was damaged by the non-notification

Answer 139

non-notification

Question 140

A security interest for ____is perfected upon attachment if the seller lends the buyer funds to purchase the goods. This security interest is a ___

Answer 140

consumer interests,Purchase Money Security Interest (PMSI)