BL2 - CH 31: BANKRUPTCY LAW
EXAM ACTUAL QUESTIONS AND
CORRECT ANSWERS
What is the last option of the debtor if he or she cannot get out of a financial situation? -
CORRECT ANSWERS✅✅Bankruptcy
*Note*: Bankruptcy is provided under federal law (where states have little input).
- Bankruptcy proceedings are held in federal bankruptcy courts under the federal court
system.
What are the two main goals of bankruptcy law? - CORRECT ANSWERS✅✅1) Fair
treatment of the Debtor - to give him or her a fresh start without creditors' claims.
2) Fair treatment of the Creditor - to provide reasonable access to a debtor's assets.
The four types of bankruptcy relief discussed under the Bankruptcy Code: - CORRECT
ANSWERS✅✅1) Liquidation - Chapter 7
2) Reorganization - Chapter 11
3) Individuals with Regular Incomes - Chapter 13
4) Family Farmers and Fisherman - Chapter 12
What is Bankruptcy Protection? - CORRECT ANSWERS✅✅It is the process of
establishing bankruptcy sooner than later in order to protect the creditors in receiving their
owed funds and protecting debtors in establishing bankruptcy before they are in dyer need.
Chapter 7 - Liquidation
What is the Liquidation Process of Bankruptcy? - CORRECT ANSWERS✅✅It is the legal
liquidation of the debtor's proceedings by selling all nonexempt assets and the distribution of
the proceeds to the debtor's creditors.
Who performs the Liquidation Process on behalf of the debtor? - CORRECT
ANSWERS✅✅A Bankruptcy Trustee
, - This is a person who is appointed by the court to manage the debtor's funds, selling the
nonexempt assets and proceeds to the creditors.
What happens to the remaining debts are they have been paid to the creditors? - CORRECT
ANSWERS✅✅They are discharged
- The debtor is relieved of the obligation to pay the debts.
What is the term used to describe when the debtor volunteers to liquid their debt? -
CORRECT ANSWERS✅✅Voluntary Bankruptcy
What must the debtor do before he or she can voluntarily declare bankruptcy? - CORRECT
ANSWERS✅✅The debtor must include a certificate and a voluntary petition providing that
they have received individual or group counseling from an approved agency within the last
180 days.
*Note*: This is done to see if the that person or company is "fit for bankruptcy".
What must be included in the debtor's voluntary petition? - CORRECT
ANSWERS✅✅Provide documents that give the full picture of their situation to the court.
- Includes: assets, liabilities, who you owe, and what you do.
*Note*: These are sworn documents, therefore, any fraudulent information within these
document will lead to persecution in court.
What is an Order for Relief? - CORRECT ANSWERS✅✅It is the court's grant of assistance
to a voluntary petition on bankruptcy when that voluntary petition is found to be proper.
What is the purpose of the Substantial Abuse-Means Test? - CORRECT ANSWERS✅✅A
test to keep upper-income people from abusing the bankruptcy process.
*Note*: This is to ensure that the bankruptcy program is not misused.
The Basic Formula for the Substantial Abuse-Means Test: - CORRECT ANSWERS✅✅The
debtor's average monthly income in recent months is compared with the median income in
the geographic area in which the person lives.
*Note*: When a person is below that median income, they are allowed to file bankruptcy.
What is the term used to describe when the creditors force the debtor into bankruptcy
proceedings? - CORRECT ANSWERS✅✅Involuntary Bankruptcy
In order for a creditor to force bankruptcy upon the debtor, what requirements must be met? -
CORRECT ANSWERS✅✅1) If the debtor has twelve or more creditors, three or more of
these creditors having unsecured claims totaling at least $15,325 must join the petition.
EXAM ACTUAL QUESTIONS AND
CORRECT ANSWERS
What is the last option of the debtor if he or she cannot get out of a financial situation? -
CORRECT ANSWERS✅✅Bankruptcy
*Note*: Bankruptcy is provided under federal law (where states have little input).
- Bankruptcy proceedings are held in federal bankruptcy courts under the federal court
system.
What are the two main goals of bankruptcy law? - CORRECT ANSWERS✅✅1) Fair
treatment of the Debtor - to give him or her a fresh start without creditors' claims.
2) Fair treatment of the Creditor - to provide reasonable access to a debtor's assets.
The four types of bankruptcy relief discussed under the Bankruptcy Code: - CORRECT
ANSWERS✅✅1) Liquidation - Chapter 7
2) Reorganization - Chapter 11
3) Individuals with Regular Incomes - Chapter 13
4) Family Farmers and Fisherman - Chapter 12
What is Bankruptcy Protection? - CORRECT ANSWERS✅✅It is the process of
establishing bankruptcy sooner than later in order to protect the creditors in receiving their
owed funds and protecting debtors in establishing bankruptcy before they are in dyer need.
Chapter 7 - Liquidation
What is the Liquidation Process of Bankruptcy? - CORRECT ANSWERS✅✅It is the legal
liquidation of the debtor's proceedings by selling all nonexempt assets and the distribution of
the proceeds to the debtor's creditors.
Who performs the Liquidation Process on behalf of the debtor? - CORRECT
ANSWERS✅✅A Bankruptcy Trustee
, - This is a person who is appointed by the court to manage the debtor's funds, selling the
nonexempt assets and proceeds to the creditors.
What happens to the remaining debts are they have been paid to the creditors? - CORRECT
ANSWERS✅✅They are discharged
- The debtor is relieved of the obligation to pay the debts.
What is the term used to describe when the debtor volunteers to liquid their debt? -
CORRECT ANSWERS✅✅Voluntary Bankruptcy
What must the debtor do before he or she can voluntarily declare bankruptcy? - CORRECT
ANSWERS✅✅The debtor must include a certificate and a voluntary petition providing that
they have received individual or group counseling from an approved agency within the last
180 days.
*Note*: This is done to see if the that person or company is "fit for bankruptcy".
What must be included in the debtor's voluntary petition? - CORRECT
ANSWERS✅✅Provide documents that give the full picture of their situation to the court.
- Includes: assets, liabilities, who you owe, and what you do.
*Note*: These are sworn documents, therefore, any fraudulent information within these
document will lead to persecution in court.
What is an Order for Relief? - CORRECT ANSWERS✅✅It is the court's grant of assistance
to a voluntary petition on bankruptcy when that voluntary petition is found to be proper.
What is the purpose of the Substantial Abuse-Means Test? - CORRECT ANSWERS✅✅A
test to keep upper-income people from abusing the bankruptcy process.
*Note*: This is to ensure that the bankruptcy program is not misused.
The Basic Formula for the Substantial Abuse-Means Test: - CORRECT ANSWERS✅✅The
debtor's average monthly income in recent months is compared with the median income in
the geographic area in which the person lives.
*Note*: When a person is below that median income, they are allowed to file bankruptcy.
What is the term used to describe when the creditors force the debtor into bankruptcy
proceedings? - CORRECT ANSWERS✅✅Involuntary Bankruptcy
In order for a creditor to force bankruptcy upon the debtor, what requirements must be met? -
CORRECT ANSWERS✅✅1) If the debtor has twelve or more creditors, three or more of
these creditors having unsecured claims totaling at least $15,325 must join the petition.
