Br - Story Cards

Front 1

What are the three ways to commence a Bkr case?

Back 1

Voluntary §301, Voluntary Spouses §302, Involuntary §303

Front 2

What are the two immediate consequences of filing a case?

Back 2

(1) an estate is created §541 and (2) an “automatic stay” arises §362

Front 3

What is the Bankruptcy Estate?

Back 3

The Estate is an entity, separate and distinct from the D

Front 4

What are the two ways to dismiss a Bkr case?

Back 4

(1) Voluntary §707(a),
(2) Involuntary by creditor707(b)(1)
(3) Involuntary by court §305

Front 5

What section covers “Discharge of debts?”

Back 5

§524

Front 6

Who gets a discharge?

Back 6

D has debts discharged in all chapter §524.

Front 7

What is the effect of a Debtors discharge?

Back 7

D is discharged from personal liability of the debt.

Front 8

4-1(1): D owes C $10,000. D files a Chapter 7 petition. C receives $500 from D's Chapter 7 trustee. D receives a discharge. Can C sue D for the other $9,500?

Back 8

No, Sec 524(a)(2) states that a discharge in a case operates as an injunction against the commencement or continuation, act, etc. to collect.

Front 9

4-1(3): D Corp. owes C $100,000. D Corp files a Chapter 11 petition. D Corp's Chapter 11 plan is confirmed and D Corp obtains a discharge, 11 U.S.C. §1141(d). The plan provides for 10 monthly payments of $5,000 to C. D Corp makes two of the monthly payments and then fails to make the other 8 monthly payments of $5,000. Which of the following, if any can C sue D for? (A) $40,000 (B) $90,000 C: Both $40 & $90 (D) Neither $40 or $90.

Back 9

(A) C can sue D for $40,000 because the effect of confirmation under §1141, everyone is bound by the plan

Front 10

4-1(4): D owes his dentist Dr. Szell $4,000. D files for Bkr. Dr. Szell receives $200 from D's Bkr. D receives a discharge. Dr. Szell can refues to treat D's children unless the old debt is first paid? T/F

Back 10

False, under §524 refusing to treat D children until the discharged debt is paid would constitute an act to collect.

Front 11

4-2: D owes S $20,000. The debt is secured by a lien on D's truck. D files a Ch-7 petition, claims the truck as exempt, receives a discharge, and retains the truck. Can S still repossess the truck?

Back 11

Yes, S can still repo the truck. §524 prohibits C from coming after D personally. However, for secured creditors, the bkr case cannot take away the property interest originally conveyed.

Front 12

4-3(1): D owes C $30,000. The debt is guaranteed by G. D files a Chapter 7 petition. C receives $3,000 from D's Ch-7 trustee. D receives a discharge. Can C sue G for the other $27,000?

Back 12

Yes, under §524, C can sue the guarantor for any deficiency resulting from the discharge. Debt is still there, C just can't go after D. Guarantor can avoid himself by filing for bkr.

Front 13

4-3(2): C has a $1M malpractice judgment against Dr. D. Dr. D files a Ch-7 petition and receives a discharge. Can C recover from Dr. D's malpractice insurer?

Back 13

Yes, C can recover from D's malpractice insurer under §524(a). Discharge in Bkr only protects D against liability, but the debt is still there.

Front 14

What happens to a secured C's claim if the amount received from the T's sale of the collateral, does not fully cover the lien?

Back 14

Bifurcated §506

Front 15

The Bankruptcy Estate qualifies as a “person”. T/F

Back 15

False, 11 USC §101(41) defines persons as individuals, partnerships, and corporations. 11 USC §101(15) an estate is an “entity” but is not a person.

Front 16

How do we determine what property is included in the Estate?

Back 16

Sec. 541(a)(1) describes 3 questions to analyize whether proeprty qualifies as property of the estate.

Front 18

What are the three questions of analysis in determining whether an item is property of the estate?

Back 18

Sec. 541(a) describes 3 questions to analyize whether proeprty qualifies as property of the estate. (1) is the item property? (2) if so, what is D's interst in it? (3) if so, did D have the interst at the time of commencement of the Bkr estate?

Front 19

4-11(1): D is paid every Friday. D files a bankruptcy petition on Friday, April 1. The paycheck that she receives on April 8th would be property of the estate. T/F

Back 19

False, §541(a) states that PoE includes all legal or equitable interests of the D in property as of the commencement of the case... Therefore, the paycheck on April 8th would be post-commencement and earnings of the individual.

Front 20

4-11(2): D owns a rental house. She files a Ch-7 petition on Sept 30. The October rent on D's house would not be property of the estate. T/F

Back 20

False, §541(a)(6) includes proceeds, products, offspring, rents or profits from PoE. Therefore, the Oct rent would be PoE.

Front 21

4-11(3): ANC Rental Corp, files a Ch-11 petition on November 13 and continues to rent cars and operate its business. Are rentals received after November 13 property of the estate?

Back 21

Yes. The cars in inventory would be PoE.--> §541(a). Profits from renting the pre-commencement PoE (cars) would be PoE --> §541(a)(6)

Front 22

4-11(4): Delta Airlines Inc. filed its Ch-11 petition on Sept 14, 2005. Are its post Sept 14th ,2005 earnings “property of the estate?”

Back 22

Yes, although part of propfit is from pre-commencement property (airplane) and part is also value added by services (pilot), however, only individuals are entitled to the earnings exception. Therefore, Delta Airliens Inc does not qualify for the post-petition earnings exemption, and it would be property of the estate. §541(a)(6)

Front 23

4-11(5): How do we know what the D's interests in property are?

Back 23

D must file a schedule of assets --> §521

Front 24

4-12: T tortuously injuries P. P sues T for damages for her personal injuries. While the law suit is pending, P files for bankruptcy. Is the pending law suit “property of the estate”?

Back 24

Yes, §541(a)(1) pending lawsuits are “legal interests” of D

Front 25

4-13(1): D and T each own an undivided 50% interest in Blackacre. D files for bankruptcy. Is blackacre property of the estate?

Back 25

Yes. §541(a) 50% of Blackacre is property of the estate, because D has an interest of 50% of Blackacre. The extent of D's ownership is determined by state law. Assuming that D and T are tenants in common and D owns 50%

Front 26

(4-13.2) D is leasing Blackacre for ten years. D files for bankruptcy. Is blackacre property of the estate?

Back 26

§541(a) D's interest is the right to possess blackacre for 10 years and its becomes property of the estate.

Front 27

4-13.3 F loaned D $100,000 to buy Blackacre and retained a mortgage on Blackacre as security. D later files for bankruptcy. Is Blackacre property of the estate?

Back 27

§541(a) Yes, D's interest in ownership of Blackacre subject to a purchase-money mortgage.

Front 28

4-14.1 D owes M $100,000. D owns Blackacre. M has a first mortgage on Blackacre. Blackacre has a value of $60,000. What is the amount of M's secured claim? (A) 30k (B) 40k (C) 60k

Back 28

(C) 60k. §506(a)(1)

Front 29

4-14.2. D owes M $100k. D only has a 50% ownership interest in Blackacre. Blackacre has a value of $60k. What is the amount of M's secured claim? (A) 30k (B) 40k (C) 60k

Back 29

(A) 30k §506(a)(1)

Front 30

4-14.3. D owes M $100k. D owns Blackacre. M has a second mortgage on Blackacre. F has a first mortgage for $20k. Blackacre has a value of $60k. What is the amount of M's secured claim? (A) 30k (B) 40k (C) 60k

Back 30

(B) 40k §506(a)(1)

Front 31

4-14.4. D owes M $100k. M has a mortgage on Blackacre. D files for bankruptcy. M obtains relief from the stay and forecloses on Blackacre. M sells Blackacre for $40k. M has a secured claim. T/F

Back 31

False. §506(a)(1) M has no secured claim after selling Blackacre. M still has an unsecured claim of $60k.

Front 32

4-14.5. D owes M $100k. M has a mortgage on Blackacre. D files for bankruptcy. M obtains relief from the stay and forecloses on Blackacre. M sells Blackacre for $40k. Blackacre would be “property of the estate.” T/F

Back 32

True, §506(a)(1) to the extent of D's interest.

Front 33

4-15: D is in Ch-11. S has a first mortgage on D's building. D owes S $3,200. D's Ch-11 plan provides for D to continue operating as a furniture store in the same building. In determining the amount of S's secured claim, the bankruptcy court should apply §506(a)(2). T/F.

Back 33

False, §506(a)(2) doesn't apply to Ch-11 cases, only to 7 and 13, individuals and personal property. The court would need Rash to find the replacement value should prevail since we are dealing with Ch-11, a corporation and real estate.

Front 34

4-16: D files a Ch-13 petition on Nov 25, 2005, the day before M is scheduled to foreclose on D's property. A month later, D files a motion to dismiss her Ch-13 petition which the court grants. Shortly thereafter, the requisite number of D's creditors files an involuntary bankruptcy petition against her pursuant to section 303. D is not worried because she is confident that the automatic stay will keep her creditors at bay. T/F.

Back 34

False, §362(c)(3)(A) states that the stay shall end after 30 days of the filing of a latter case, unless D can justify exception to this automatic stay termination of the stay in “good faith”.

Front 35

4-15.1. An individual injured by a willful violation of the automatic stay may recover: (A) Costs (B) Attorney's Fees (C) Punitive Damages (D) A & B (E) A & C (F) All of the above (G) None of the above.

Back 35

(F) All of the above. §362(h) – individual injured can recover actual damages, costs, fees, and punitive damages.

Front 36

4-17: On Jan 15, D borrows $10k from C. On Feb 22, D defaults. On Jun 6th, C files a collection action. On Aug 8th, C obtains a default judgment. On Sept 9th, D files a bankruptcy petition. C cannot enforce judgment on D. T/F.

Back 36

True, §362(a)(2) the stay would preclude an collection

Front 37

4-18: P brings a civil antitrust action against D Corp. After the second week of what is projected to be a seven week trial, D Corp. files for bankruptcy and claims the trial cannot continue. T/F.

Back 37

True, §362(a)(1) precludes the continuation of any pre-commencement litigation

Front 38

4-19: On April 5, D files a bankruptcy petition. On June 1, D negligently injures X. Which of the following are correct? (A) The automatic stay prevents X from commencing an action in state court against D. (B) The automatic stay prevents X from enforcing a judgment entered in such a state court action against D's property. (C) A & B (D) None of the above.

Back 38

(D) None of the above. §362(a)(1) and (2) stay only apply to pre-commencement litigation. However, §362(a)(3) and (4) apply to all actions (post and pre-judgment) as long as it is property of the estate. §362(a)(5) protects D's property only for pre-commencement claims. Thus, the stay will not protect D's property but will for property of the estate.

Front 39

4-20: When D defaulted on her debt, C foreclosed its mortgage on D's building. C's foreclosure sale is scheduled for Thursday afternoon. If D files for bankruptcy on Thursday morning, the foreclosure sale will be stayed. T/F.

Back 39

True, §362(a)(4) the stay applies to any act to create, perfect, or enforce any lien against property of the estate. Collateral is probably property of the estate.

Front 40

4-21: On April 10, 2000, D filed a voluntary petition for protection under Chapter 7 of the Code. D attended a meeting of creditors on May 8,2000. Following the meeting, AGF's representative stopped D in the courthouse's hallway, repeatedly asking her why she was not going to pay the debt she owed AGF. AGF's representative has violated the stay. T/F

Back 40

True, §362(a)(6) any act to collect, assess, or recover a claim against the D that arose before the commencement of the case.

Front 41

4-22: C makes a loan to D. G guarantees D's payment. D later files for Chapter 7 bankruptcy. The automatic stay bars C from suing G. T/F.

Back 41

False, the automatic stay protects only the D, not third parties, such as guarantors

Front 42

4-23: Your client, D Inc has filed a Chapter 11 petition. D Inc's debt to C is guaranteed by G, who is the CEO and principal stockholder of D Inc. C has sued G in state court on the guarantee. G has asked you to do something about this. Which of the following is true? (A) You may represent G as his attorney. (B) D Inc's attorney can ask the bankruptcy court to protect G. (C) A but not B (D) B but not A.

Back 42

(D) B but not A. Since you represent the attorney for D Inc, there may be a conflict of interest and you probably should not represent the CEO as well. However, you could ask for the court to protect G under §105(a).

Front 43

4-24: D owes B $3k on an unsecured loan when D files Ch-13. R had guaranteed D's payment. D's Ch-13 plan proposes to pay B $50 a month for 60 months. B can still sue R for the unsecured loan. T/F

Back 43

False, §1301 protects third party guarantors from liability IF D proposes to pay the debt in full.

Front 44

4-25: P files a civil suit against D and D's insurer for injuries from an automobile accident. D files a bankruptcy petition the day that closing arguments are scheduled in the trial of that civil suit. Because of the automatic stay, there is nothing P can do because the automatic stay prohibits the trial from continuing. T/F

Back 44

False. Continuation of the proceeding would violate the automatic stay, however, §362(d)(1) P should demonstrate that the case should conclude in the interest of efficiency. Case is almost over and should be allowed to finish.

Front 45

4-26: D owns and operates a tavern. S has a mortgage on the tavern building. When D defaults on the mortgage payments, D and S change, the mortgage loan terms, reducing the amount of monthly payments and the interest rate. Their new mortgage agreement provides that if D files for bankruptcy, S's concessions in the loan restructuring are “cause” for relief from the stay so that S can foreclose on its mortgage. D files for bankruptcy. S files a motion for relief from the stay under §362(d)(1) so that it can foreclose. The court will probably grant S relief from the stay. T/F

Back 45

True, §362(d)(2) the court will probably allow relief from the stay “for cause” because courts generally favor the restructuring that tries to keep D out of Bankruptcy.

Front 46

4-27: C has a mortgage on the buildings of D to secure a $19 million debt. D just filed Ch-11. If C shows that the property is not necessary for reorganization, the bankruptcy court will probably grant C relief from the stay. T/F

Back 46

False, §362(d)(2) requires a showing that the D has no equity in the property and that the property is not necessary for successful reorganization. Must show both.

Front 47

4-27.1: Effective reorganization means a reasonable prospect for successfully reorganizing within a reasonable time. T/F

Back 47

True. §362(d)(2)

Front 48

4-28: D owes C $100k. C has a lien on D's equipment worth $40k. What right of C qualifies for adequate protection? (A) C's contract right to be paid $100k. (B) C's property rights in equipment worth $40k. (C) Both A & B. (D) Neither A or B.

Back 48

(B) only the property interest is entitled to adequate protection ($40k) §361

Front 49

4-29: D owes C $200k. C has a lien on equipment worth $180k. If the value of this equipment is declining by $5k a month, D can provide adequate protection by pay C $5k a month. T/F

Back 49

True. §361 The property interest of $180k is entitled to adequate protection. C can only have a lien up to the value of the collateral. D can provide adequate protection to C by paying $5k per month.

Front 50

4-30: D owes C $200k. C has a lien on equipment worth $250k. The value of the equipment is declining by $5k a month. If D's debt to C was based on a note which provides for interest of 10% per year, C's equity cushion would be adequate protection. T/F

Back 50

True. §361. C is over-secured when the collateral is worth more than the value of C's lien. This is an equity cushion. C has a $50k equity cushion which would last as adequate protection for about 2 years.

Front 51

4-32: D, a Ch-11 debtor owns a ski resort – Colorado Outdoor Lodge (COL). D owes F $4 Million; F has a first mortgage on COL that provides for 5% interest. D also owes S $2 million; S has a second mortgage on COL that provides for 10% interest. The value of COL is no more than $5.5 million and not less than $5 million. Which of the following are true: (A) If S moved for relief from the stay, S could satisfy the burden of proof. (B) If F moved for relief from the stay, F could satisfy the burden of proof. (C) S would be allowed interest on its secured claim. (D) A & B, but not C. (E) C, but not A or B.

Back 51

(D) A & B, but not C. Under §362(d)(2)(A) both (A) and (B) are true. However, (C) is false because S is undersecured.

Front 52

5-1: D, a self-employed long distance trucker, tells you that the finance company is “fixing to” repossess his tractor and trailer and that he is “maxed out” on his credit cards, and has doctor bills, and... If D decides to files for bankruptcy, which of the following are true: (A) At the time of filing, the automatic stay will provide immediate protection from the collection efforts of creditors that are listed in the bankruptcy petition. (B) D is eligible to file Chapter 7,11, or 13. (C) D must satisfactorily try to receive credit counseling or briefing about credit counseling opportunities at some time before the end of the Bankruptcy. (D) D must give written notice to his creditor. (E) A and B only. (F) B & D only.

Back 52

(F) B & D only. §109 D would qualify for Ch-7, 11 or 13. §109(h)

Front 53

5-2: King & Spalding LLP is a law partnership with hundred's of partners. Spalding decides that the firm is never going to make it and plans to file for bankruptcy for the entire “King & Spalding, LLP” firm. King protests, but Spalding says that the partnership agreement gives him the authority and the Bankruptcy Code would allow him to. T/F.

Back 53

True, §109(a) allows for “persons” to file for bankruptcy. §101(41) defines partnerships as a person. Since the partnership agreement gives Spalding the authority to make the decision. §303(b)(3) allows for involuntary bankruptcy of a partnership.

Front 54

5-3: D owns a bar (D's Bar), a barbershop (D's Barbershop), and a barbecue stand (D's BBQ). D is the only owner; he keeps a separate set of books for each business. The bar and the barbecue are profitable. D is losing money on the barbershop. Which of the following are true: (A) D can file a bankruptcy petition for “D's Barbershop”. (B) D cannot file a bankruptcy petition for “D's Barbershop”. (C) D can personally file for bankruptcy, which would include all of his personally owned businesses. (D) Both B & C.

Back 54

(D) Both B & C. §109(a) allows “persons” to file bankruptcy. §101(41) does not list sole proprietorships as “persons” for bankruptcy purposes. “D's Barbershop” is a sole proprietorship and therefore NOT a person separate from D. So (A) is false and (B) is true. However (C) is also correct because D could file personally for bankruptcy because D is a person so (D) is the correct answer.

Front 55

5-4: D files for bankruptcy in 2004. D cannot file for bankruptcy again until 2012. T/F

Back 55

False, D can always FILE for bankruptcy, §727(a)(8) D may not get another DISCHARGE for 8 years, and then only if someone objects.

Front 56

5-5: EMNP, Inc. has “liquidity” problems. While the market value of its assets exceeds its debt, its current earnings are not sufficient to satisfy its current payment obligations. EMNP is eligible for bankruptcy. T/F

Back 56

False, Regardless of the fact that EMNP would not be concidered “insolvent”, §109 does not require 'insolvency” to be eligible for bankruptcy.

Front 57

5-6: In 2003, C makes a real estate loan to L Limited Partnership (L). In 2004, L is in default. C and L agree to restructure the loan. The workout agreement reduces the interest rate, extends the payment period, forgives default interest that had accrued, eliminates some of the financial covenants and operational restrictions, and provides that L will not file a bankruptcy petition for three years. L files a bankruptcy petition in 2005. Which of the following are true: (A) L is in breach of contract and therefore cannot receive a discharge in bankruptcy. (B) L is in breach of contract and therefore bankruptcy petition will be rejected by the court. (C) L is in default and can file for bankruptcy.

Back 57

(C) L's breach of contract will place them in default, however even though debtors can bargain away a stay against a particular creditor after filing, agreements not to file at all are generally not enforceable. §109?

Front 58

5-10(3): X and Y are a gay couple that live together in a state that bans gay marriage. If only X files for bankruptcy, which of the following are true: (A) Y's earnings are relevant to determining X's current monthly income. (B) The after school and summer earnings of C, X's 16 year old adopted son, are relevant in determining X's current monthly income. (C) Both A & B. (D) Neither A or B.

Back 58

(C) Both A & B. X & Y aren't married §101(10A)(B). The CMI of X includes Y's and C's earnings if they are contributing to household expenses of X and X's dependents.

Front 59

5-10(4): H is divorced from W. While H lives in a different house from W, H pays W's living expenses and shares custody of their two children with her. If H files for bankruptcy, what is the number of members his attorney should look at to determine H's median family income? (A) 1 (B) 2 (C) 4

Back 59

(C) is the most likely, because H expenses include those paid for dependents and spouses. If W is H's dependent, the expenses for her should be deducted. The language of §101(10A) suggest that H dependents do not have to live with him.

Front 60

5-11: Denny Crane is a partner in the law firm of Crane, Poole & Schmidt. Some years his partnership earnings are as high as $2,000,000. Some years as low as $500,000. Is Denny Crane eligible for Chapter 13? (A) Yes. (B) No.

Back 60

(A) Yes. §109(e) requires that an “individual” filing Ch-13 have “regualr income”. Denny seems to have regular income and is an individual.

Front 61

5-14: Can Epstein, an individual who is not in business and has only consumer debts, file for Chapter 11 relief? (A) Yes (B) No.

Back 61

(A) Yes. §109(d) eligibility requries only that D be eligible for Ch-7 in order to be eligible for Ch-11 even though it's generally not practical to be in Chapter 11 for individuals.

Front 62

5-15: S has a lien on most but not all of D's, Inc.'s assets. D, Inc. is in default on its loan from S. D, Inc. has stopped its business operations and is trying to sell its assets. S commences foreclosure proceedings. Can D, Inc. file a Chapter 11 petition and sell its assets in Chapter 11? (A) Yes (B) No.

Back 62

(A) Yes, §1123(b)(4) provides for the sale of all property of the estate, called the “Liquidating Plan”. However, in Chapter 11, the D is in possession of the property. D is the one performing the sale, which will ideally maximize the amount received and will take longer to sell.

Front 63

6-1: D owes C $200,000 on an unsecured basis. The D-C contract provides for interest-only payments of $1,100 a month. D files a Chapter 11 petition on January 15. D's Chapter 11 plan is confirmed later that year, on December 7. Does C have an allowable claim for the interest that accrued between January 15 and December 7. (A) Yes (B) No

Back 63

(B) No. §502(b)(2) allows for objection for unmatured interest by a party in interest. Unmatured interest is the interest accrued post-filing. However, §506(b) allows SC to collect post-petition interest to the extent that they are over-secured. C would have a claim for interest accruing pre-January 15 but not for Jan 15 - Dec 7th.

Front 64

6-2: D rents a building from L in April 2000. The term of the lease is 32 years; the lease terms call for monthly rental payments of $20,000 a month. In April 2003, D files a Ch-7 bankruptcy petition. At the time of D's bankruptcy filing, D owes L $60,000 in back rent. How much of a claim will the court allow L? (A) $168,000 (B) $300,000 (C) $1,044,000 (D) $3,192,000

Back 64

(D) $3,192,000. §502(b)(6) allows for an interested party to object to C claims for leases. However, it only allows a maximum of either 1 year's worth of rent, or 15% of whats left on the lease up to 3 years. Whichever is larger. In addition, it allows for “back rent” or the rend defaulted on. So, 1 years worth of rent ($240k) plus back rent ($60k) = $300k. The other formula would be whats left of the lease ($6.96 mill) times 15% ($1,044,000) times 3 years => $3.132 Million. Add the $60k back rent for a total of $3,192,000.

Front 65

6-3: D Co. files a Chapter 11 petition. V, one of D Co.'s vendor's has an unsecured claim against D Co. for $600k and has filed its proof of claim for $600k. T has offered to buy V's claim for $50k. If V sells the claim to T, other creditors can move to disallow all but $50k of T's assigned claim. T/F.

Back 65

False. §502 The Code does not address addressing claims and T is taking a gamble that its distribution will be more than $50k.

Front 66

6-4: D has filed a Chapter 11 petition. Your client, CSC is solvent. CSC and D were jointly responsible for chemical releases. CSC's experts estimate that it will cost more than $2,500,000 to address the environmental problems caused by these releases. Under the relevant federal environmental laws, CSC and D are jointly and severally liable, and each has a right of contribution against the other. Thus far, the EPA has not taken any action against either CSC or D. (A) Tell your client not to worry about it. (B) Move the Bankruptcy Court to disallow any claim for reimbursement from from your client.

Back 66

(B) Move court to disallow any claim for reimbursement because the claim is still “contingent” on the possible suit. §502(e)(1)(B).

Front 67

6-5: Perris Pupik Piercing LLP, (P), files a Chapter 7 bankruptcy. The major unsecured claims against P includes a $6,000 claim for pre-petition rent, $70k on an unsecured loan, $8k to jewelry suppliers and $100k tort claim by C, a customer who claims that her belly button was damaged by P's negligent piercing. C's law suit was pending at the time of P's Chapter 7 filing. Should the Bankruptcy Court estimate C's claim? (A) Yes (B) No

Back 67

(A) Yes. §502(c)(1) court shall estimate claims for any contingent and unliquidated claims if fixing the amount would unduly delay the bankruptcy. Here it looks like the civil suit just started, so waiting for its conclusion would probably delay the bankruptcy. The court would then have a truncated proceeding to come up with a damages amount. Using the “economic man” rational, the court will guess whether the plaintiff had good chances of winning and if so allow a claim by that %, with less than 50% guessing they would have lost and received nothing.

Front 68

6-7: “Big Corp” files for Ch-11 bankruptcy. You are the senior partner at “Huge Firm, LLP” and Big Corp wants your firm to help it with the bankruptcy case. Your firm doesn't usually handle bankruptcy cases but there are some unique issues in this case that your firm would be uniquely qualified and competent to handle. However, some of your partners are concerned about taking the job. It will require hundreds of hours and these partners are concerned that the firm won't get paid, besides, Big Corp is filing for bankruptcy. You have your people run an estimation and figure that Huge Firm, LLP will probably bill out $200k in fees. Big Corps assets are estimated to be worth $250k. Would it be a safe economic bet for your firm to take the case? (A) Yes (B) No

Back 68

(A) Yes. §507 allows for administrative expenses allowed under §503(b) to be paid 2nd after domestic obligations are paid in full. Since this is a corporation filing for bankruptcy, there is probably not any domestic obligations! §503(b) lists expenses, each item or claim is on equal footing. ie it gets paid pro rata. However, each of the items listed in §503(b) must be paid in full before we can move down the list of priorities in §507. §503(b)(2) allows compensation awarded under §330(a). §330(a) allows for professional fees for the trustee and compensation to people like examiners, accountants, lawyers, and other professionals that provide actual necessary services. In this situation, Huge Firm will be top of the priority list as an administrative expense in helping the Trustee (DIP) reorganize.

Front 69

6-8: Waxman is a Chapter 7 debtor. He retained and paid Isaac Blachor, Esq. $1,500 pre-petition for the preparation and filing of the bankruptcy petition and schedules and representing him at the meeting of creditors in the bankruptcy case. Shortly after the petition was filed, Waxman's principal creditor retained bankruptcy cousel who commenced an adversary proceeding against Waxman to have his debt deemed non-dischargeable pursuant to Section 523 of the Code, and to deny Waxman a discharge pursuant to §727 of the Code. Isaac Blachor, Esq. represented Waxman in the post petition adversary proceedings but was never paid by Waxman. Can Blachor get reimbursed for the post petition work from the Estate? (A) Yes (B) No

Back 69

(B) No. 330(a)(1)(A) requires that professional services be actual and “necessary” for the benefit and administration of the estate. §330(a)(4) states that compensation shall not be allowed if services were not (I) reasonably likely to benefit the debtor's estate, or (II) necessary to the administration of the case. Fees paid ($1,500) to D's lawyer were out of D's pocket. No way this is an administrative expense. Prepetition work is never administrative expenses associated with the bankruptcy case. After filing, D hasn't paid lawyer, the lawyer must file a claim. However, the lawyers claim would not have any priority §330(b),§503,§507. Thus, lawyer has only a §726(2) general claim without priority.

Front 70

6-9: Davidoff of Tuscaloosa, Inc (D), a cigar store, files for Chapter 7. Are the costs that the Chapter 7 trustee incurs in storing the cigars an administrative expense? (A) Yes (B) No.

Back 70

(A) Yes, probably. §503(b)(1)(A) ... expense of preserving the estate. The cigars would be property of the estate.

Front 71

6-10: D cigar store files for Chapter 11 on June 30. Which of the following would qualify as “administrative expenses.”: (A) July salary for its store manager (B) June salary for the store manager (C) Tort claim of a customer who slipped, fell and hurt herself in D's store in July, after D had filed its Chapter 11 petition. (D) A and B. (E) A and C (F) A, B and C.

Back 71

(E) A and C.§503(b)(1)(A)(i) administrative expenses include actual, necessary costs and expenses of preserving the estate, including wages, salaries, and commissions ... rendered AFTER the commencement of the case. So, the July salaries would count. Additionally, the Tort claim would probably be considered actual and necessary to preserve the estate because loosing it could deplete the estate screwing the other C.

Front 72

6-11: D Corp is planning to file a Chapter 11 petition. Your law firm is one of several firms that P and G, president and general counsel, consider retaining. In the interviews, P and G tell you that they are concerned that many of the most irreplaceable employees may find other jobs during the long bankruptcy process. P and G ask if there is any way the bankruptcy court would allow D Corp to give bonuses to these important employees to give them incentive to stay. Could this be allowable under the Code? (A) Yes (B) No

Back 72

(A) Yes, of course. §503(c) speaks to this kind of key employee retention plan.

Front 73

6-12: D, a chain of convenience stores, files a Chapter 11 petition. In the 20 days before D's bankruptcy filing, D obtained the following: (A) New software from A, (B) Inventory from B, (C) Equipment from C. Before its bankruptcy filing, D did not make any payments to A or B but D made a 50% down payment to C. Between A, B, and C which ones are considered “administrative expenses?” (A) New software from A. (B) Inventory from B. (C) Equipment from C. (D) A and B (E) A, B, and C

Back 73

(E) A,B,C. §503(b)(9) would include all of them as administrative expenses.

Front 74

6-13: W comes to you for advice. Her husband, H, who just graduated from medical school, has filed for divorce. H and W have no children. They were married during H's first year of medical school, and W worked two jobs to pay H's medical school tuition and their living costs. H has offered to make monthly payments to W for four years measured by 75% of W's earnings during the four years he was in medical school. W is concerned that if she agrees, H might file for bankruptcy in those four years and H's creditors would deplete the estate leaving nothing for W. T/F

Back 74

False. §507(a)(1)(A) Domestic support claims receive 1st priority as of the date of filing. Is this a domestic support obligation? §101(14A) no divorce decree yet, not alimony or domestic support, its a property settlement. But definition says “in the nature of alimony” and this agreement is probably close enough to qualify. Additionally, §523(a)(5) and (15) - domestic claims are NOT dischargeable.

Front 75

6-17: D Corp is in Chapter 11 bankruptcy. D corp owns Blackacre. D Corp's creditors include F,S,T,U,V,W,X,Y, and Z. F has a $700k first mortgage on Blackacre; S has a $500k second mortgage on Blackacre. Blackacre has a value of $1 Million. X,Y, and Z are asserting that they have priority claims. You tell F: (A) Don't worry about it (B) Worry very much!

Back 75

(A) Don't worry about it! §507 F takes $700k because it is a secured creditor. Secured creditors take BEFORE

Front 76

7-1: D transfers real property to X. At the times of the transfer, the property was worth $400k. X later sells the property to Y for $330k. D later files for bankruptcy. Y still owns the real property. Because of declining property values, the property is now worth only $220k. The trustee is able to avoid the transfer. Assuming that Y purchased the property in good faith for $330k, then how much can the Trustee recover from X? (A) $220k (B) $330k (C) $400k (D) $0

Back 76

(C) $400k. §550 if the transfer is avoided, the T may recover either the property or the value of the property for the value at the time of initial transfer. T can not recover from parties who acquired property in good faith without knowledge of the transfers voidability. Here if Y bought the property in good faith, then the T could avoid X's transfer for the full value at the time ($400k).

Front 77

7-3: D Ltd is a limited partnership that owns and develops real estate. most of D Ltd's land is still undeveloped. The market value of D Ltd's land is $4 M. Its debts are $3 M. D Ltd's monthly payment obligations to creditors - $200k - is much greater than D Ltd's monthly earnings - $100k. In other words, D Ltd is not able to pay its debts as they mature. For purposes avoiding transfers in bankruptcy, D Ltd would be considered “insolvent.” T/F

Back 77

False §101(32) defines insolvency as liabilities more than assets. While D Ltd would be considered “equitably insolvent” for purposes of §303 involuntary bankruptcy, it does not meet the requirement of insolvency for §548 avoiding powers.

Front 78

7-4: D's creditors are threatening to repossess his boat. D, who is insolvent, gives the boat to his father F. Within a year, D files for bankruptcy. Can the T avoid the gift of the boat as a fraudulent transfer? (A) Yes, it was given with the intent to hinder creditors. (B) No, gifts to relatives are an exception.

Back 78

(A) Yes, §544(b) tells us to look back 2 years. §548(a)(1)(A) lists gifts to family as an “indicia of actual fraudulent intent”

Front 79

7-6: D's creditors are threatening to repossess his boat. D, who is insolvent, sells the boat to his friend F for $3,000. Within a year, D files fro bankruptcy. Can the bankruptcy trustee avoid the sale if she can establish that the value of the boat at the time of the sale was $7,000? (A) Yes (B) No

Back 79

(A) Probably yes. §548(a)(1)(B)(i) requires showing that “less than a reasonably equivalent value was exchanged. (REV). The cheap price, relationship to the D and the closeness to bankruptcy presents a strong argument to have this transfer avoided for being “constructively fraudulent”.

Front 80

7-10: In order for the trustee to invoke a transfer avoidance for constructive fraud, one of the requirements is that he show that D can not make current monthly payments on debts. T/F.

Back 80

False. §548(a)(1)(B)(ii)(I) requires a showing of “insolvency” as defined in §101(32)(A). That section defines insolvency as debts more than assets. It does not require a specific inability to pay monthly debts.

Front 81

7-12: D, while insolvent, transfers Greenacre to T for less than reasonably equivalent value. Three years later, D files for bankruptcy. Since the look back period in the Bankruptcy Code is only two years, the trustee may look to the state law for a potential longer “look back” period. T/F.

Back 81

True. §544(b)

Front 82

7-14: Bubba is in default on his payment obligations to 26 different creditors: A to Z. On April 5, Bubba files a bankruptcy petition. In which of the following situations could the Trustee avoid transfers?: (A) On January 15, Bubba's mother, Momma, pays $3,300 to C, one of Bubba's creditors. Neither Momma nor Bubba pays any of the other creditors. (B) On January 15, Bubba's mother, Momma, cannot find C and so she give $3,300 to Bubba with the specific direction to and for the sole purpose of paying C, and Bubba did indeed pay the $3,300 to C. (C) Both A & B. (D) Neither A or B.

Back 82

(D) Neither A or B. §547(b) does not cover situation (A) Momma's making a transfer of her money to a C. That is not a “transfer in interest of the D”. Situation (B) is almost the same, with the money earmarked for payment. It might change if Bubba keeps the money.

Front 83

7-17: D owes $100k to X, $200k to Y, and $300k to Z. On January 15, D makes a $150k payment to Z; D does not make a payment to either X or Y. On April 5, D files for Chapter 7 Bankruptcy. If “the case were a case under Chapter 7” and “the transfer had not been made” holders of unsecured claims would be paid 50% from D's bankruptcy. Is the $150k payment to Z a preference? (A) Yes (B) No

Back 83

(Yes) §547(b) any payment to unsecured C within 90 days of an antecedent debt will be a preferential treatment unless there will be a 100% distribution to the estate (very unlikely). These payments will always make the unsecured C's better off. $150k transfer reduced the estate of the D and remaining unsecured C's were harmed.

Front 84

7-18: D owes S $6,000. The debt to S is secured b a first mortgage on Greenacre, real property owned by D that is valued at $8,000. On January 15, D pays S $3,000. on April 5, D files a bankruptcy petition. Was the $3,000 payment a preferential transfer? (A) Yes (B) No.

Back 84

(B) No. §547(b)(5) essentially excludes “secured” creditors because they would always receive the same in bkr.

Front 85

7-19: D owes C $100. C has a first lien on collateral worth $60. D surrenders the collateral to C and C reduces the debt from $100 to $40. Two months later, D files for bankruptcy. Was the transfer of the collateral to C a preference? (A) Yes (B) No.

Back 85

(B) No preference. §547(b)(5) the transfer would not “enable such creditor to receive more” than they would have in a chapter 7 case. Here there is no preference, because the transfer to under-secured C of only that amount which is secured by transferring collateral does not make him better off. If the transfer is applied only to the secured portion of the claim, the under-secured C is no better off, so no preference. If the payment is applied to the unsecured portion, the under-secured C is better off and there is a preference. C decides which the payment will be applied, likely to take chances and apply to unsecured claim b/c secured portion will still be paid in full.

Front 86

7-20: D borrows $100k from C. G, an “insider” of D, guarantees D's payment to C and secures its guarantee by granting C a security interest in equipment worth more than $100k. D later pays C the $100k. One hundred days after paying C, D files for bankruptcy. Can D's bankruptcy trustee recover anything from anybody as a preferential transfer? (A) Yes (B) No.

Back 86

(A) Yes. In this case, payment to C was not preferential because the transfer was made to C (not an insider) outside of the 90 day look-back period of §547(b). As to G, payment reduces G's liability (either G personally or G's collateral) so is a preferential as to G. Trustee can no longer go after C due to §547(i) addition.

Front 87

7-20(2): D owes F $300k. D owes S $400k. Both F and S have security interest in all of D's equipment. The equipment has a value of $500k. D pays F in full. Thirty days after paying F in full, D files for bankruptcy. Can D's bankruptcy trustee recover anything from anybody as a preferential transfer? (A) Yes (B) No.

Back 87

(A) Yes. §550 says that we can collect from anyone once a preferential transfer is proven. However here, §547(i) would not apply as long as preference wasn't to an insider. If F was first, would not be preferential to F because F would not receive anything more than he would have under Ch.7, he's oversecured. Would be preferential to S, with F out of the picture, S's claim becomes more secured. S went from under secured to over secured, so the transfer was benefitial to S.

Front 88

7-21: Tolona, a maker of pizza, issued eight checks to Rose, its sausage supplier (and your client), within 90 days before being thrown into bankruptcy by its crediors. The checks, which totaled a shade under $46k, cleared as a result Tolona's debts to Rose were paid in full. Tolona's other major trade creditors stand to receive only 13 cents on the dollar under the plan approved by the bankruptcy court, if the preferential treatment of Rose is allowed to stand. Tolona, as debtor in possession, brought an adversary proceeding against Rose to recover the eight payments as voidable preferences. Rose's invoices recited “net 7 days,” meaning that payment was due within 7 days. For years preceding the preference period, however, Tolona rarely paid within seven days; nor did Rose's other customers. Most paid within 21 days. The eight payments at issue were made between 12 and 32 days after Rose had invoiced Tolona, for an average of 22 days. In the 34 months before the preference period, the average time for which Rose's invoices to Tolona were outstanding was 26 days and the longest time was 46 days. The trustee offers to settle her claim against Rose for $25,000. Do you settle? (A) Yes (B) No.

Back 88

(B) No, §547(c)(2) because it seems like the transfers were made within the average time period the Rosa normally received payments during their ordinary course of business.

Front 89

7-23: D is in Bankruptcy. D owes $200 to S, and S owes $100 to D. D owes $200 to A. B owes $100 to D. Which of the following are true?: (A) S has a $100 lien. (B) A has an unsecured claim of $200. (C) B does not have a claim, but D has a claim for $100 against D. (D) A and B. (E) A, B, &C. (F) None of the above.

Back 89

(E) A B & C. §541(a)(1) defines a right to payment as property of the estate so D would have a claim against B.

Front 90

7-24: D files for bankruptcy. 90 days before bankruptcy, D owes C bank $100k and has $20k on deposit in C bank. 10 days before bankruptcy, C exercised its right to setoff. At that time, D owed C bank $90k and its account in C bank had a $50k balance. Can the trustee recover any part of the $50k? (A) Yes (B) No

Back 90

(A) Yes. § 553(b) and §502(h).

Front 91

7-25: Acme and Baker are related corporations. D owes Acme $100k for goods bought on open account. Baker owes D $120k services rendered. Acme assigns its $100k account receivable to Baker. Ten days later, D files for bankruptcy. When the trustee demands Baker pay the estate the $120k for services rendered, Baker asserts a right of setoff and pays only $20k. (I don't know the answer...)

Back 91

See §533(a)

Front 92

7-27: On January 15, D borrows $666k from M. M obtains a mortgage. M improperly records the mortgage. On April 5, D files for bankruptcy. Will the trustee be available to avoid M's mortgage? (A) Yes (B) No

Back 92

(A) Yes. §544(a)(3) if there is a state law?

Front 93

7-29: On January 10 Dudley Doright, D, borrows $10k from Snidely Whiplash, S, and gives S a security interest in his horse, Horse. On December 29 later that year, S properly files the financing statement. On December 30, D files a bankruptcy petition. Will D's bankruptcy trustee be able to invalidate S's security interest under section 544? (A) Yes (B) No

Back 93

(B) No. A lien creditor who gets his lien prior to a secured party perfects wins (and vice versa). However, cannot invalidate under §544. Under sec. 547(e)(2)(B) and (C) though, the date of the transfer is the date of recordation or perfection, not the actual date of the transfer. Here the date of transfer for perference purposes would be Dec 29. A transfer occurs at the point at which a bona fide purchaser or lien creditor could no longer beat it. Thus, the Dec 29 transfer will be within the 90 day lookback and be for an antecedent debt (the amount loaned in Jan.) - trustee can invalidate under §547.

Front 94

7-31: On January 10, D borrows $10k from S. On January 10, at the very same time D signs a note promising to repay the $10k, D signs a not promising to repay the $10k, D signs a security agreement, granting S a security interest in his horse. On January 19, S properly files the financing statement. On April 15, D files a bankruptcy petition. Will D's bankruptcy trustee be able to avoid S's security interest under section 547? (A) Yes (B) No.

Back 94

(B) No, because transfer valid on Jan 10. §547(e)(2)(A) He is within the 30 day grace period - the time of transfer will be time that it really happened. §547(e) will not help the trustee.

Front 95

7-32: D owns and operates Appartments upon which WRH holds a note and mortgage. Upon D's default under the mortgage, WRH instituted foreclosure proceedings. The state court enters its order appointing you receiver to take possession of and operate the Apartments. A day after your taking possession of the Apartments, D files a Chapter 11 petition. Can the D take over running the Apartments, now that he's in bankruptcy? (A) Yes (B) No.

Back 95

(A) Technically yes. §542(a) Trustee may require turnover of anything that is property of the estate. Since this is a Ch-11 filing, the Trustee is the D in possession. §543 deals with custodian's control over “interests of the D in property”. So Trustee has power of §543 to order custodian to turn over property of the estate. In Ch-11 Trustee is Debtor in Possession. You should turn over the property to avoid contempt.

Front 96

7-34: In January, 2005, D purchased a 2005 Volvo for $35,700. The major part of the purchase price was financed by Southern Financial Corp (S). The finance contract between D and S sets out the terms of repayment and grants S a security interest in D's Volvo. By Dec 2005, D has missed three monthly payments to S. On Dec 7, S exercised its rights under its contract and under the Uniform Commercial Code and (i) repossessed the Volvo and (ii) sent D a notice of pending private sale. D's response was to file (i) a Chapter 13 petition and (ii) and adversary proceeding seeking the turnover of the Volvo under section 542 and a determination that S was violating the automatic stay of section 362 by its continued possession of the Volvo. Must S turn over the Volvo? (A) Yes (B) No.

Back 96

(A) Yes. After Whitting Pools, D still has the right to redeem - interest of the D in property = property of the estate. If it were sold though, D would no longer have any interest in the property b/c the right to redeem would be extinguished but the sale is stayed under §362. So, S must turn over the Volvo.

Front 97

8-5: L leases a building to T. The lease contains the following provisions: “The leasee shall not sell or assign this lease or sublet said premises or any part thereof without first obtaining the written consent of the lessor.” T files for bankruptcy. Will the provision negatively affect the Trustees ability to sell the lease? (A) Yes (B) No

Back 97

(B) No. Contract may include provision that terminates lease upon D filing Bank. §365(e)(1)  these clauses are unenforceable. Can’t manipulate a contract to say: All rights of D are erminated upon filing of B If D is in Bank., D cannot assign his rights under contract/lease. Here, lease provision has no effect b/c its an attempt to limit D's right to assign a contract after filing Bkr.

Front 98

8-6: Gap Inc has more than 3,000 stores in the US, UK, France, and Japan. If Gap Inc. files for bankruptcy, how long will Gap Inc have to decide whether to assume or reject its US leases? (A) 60 days (B) 90 days (C) 120 days

Back 98

(C) §365(d)(4)(A)(i) lists 120 days from the order for relief. Order for relief is issued at filing for 301 and 302 voluntary cases. But is issued much later in an 303 involuntary case.

Front 99

8-6(2): Gap Inc has more than 3,000 stores in the US, UK, France and Japan. If Gap Inc. files for bankruptcy, would Gap be required to continue making monthly rent payments until it decides whether to assume or reject these US leases? (A) Yes (B) No.

Back 99

(A) Yes. §365(d)(3).

Front 100

8-8: Your client D has filed for Chapter 11 bankruptcy and has decided to assume all of its leases. One of the landlords, L, sends you a letter claiming that the amount necessary to cure the defaults under its leases $52,000. Which amounts should the trustee pay: (A) past rent due for the months of June, July, and September of 2001, $40k. (B) late charges and interest, $7,800. (C) Attorneys Fees agreed to in lease in case of default, $4,200. (D) A, B, & C. (E) A & C (F) B & C

Back 100

(E) A & C. §365(b)(1)(A),(B),(2)(D) Trustee must pay rent (default) and maybe even interest but not late fees (those are penalties and don’t count). Attorney fees – must be paid if the contract/lease says so as a default that must be cured. If not, it is a penalty that need not be paid.

Front 101

8-9: L leases a building to D. D files for bankruptcy. If D is not in default under the lease, would D have to provide adequate assurance of future performance in order to obtain a court order approving its assumption of the lease? (A) Yes (B) No.

Back 101

(B) No. §365(b)(1)(C) Unless there is a default, we don't have to worry about providing adequate assurance for assumptions.

Front 102

8-10: Your client L owns and operates shopping centers. The “tenant mix” at its shopping center is important. More specifically, L wants one home improvement center at each of its shopping malls. L has agreed to leas space in 11 malls to Rickel Home Center, Inc. and has employed your firm to prepare the leases. If the lease includes a clause limiting the space to only “home improvement centers”, will it hold up in bankruptcy if it gets assumed or assigned? (A) Yes (B) No.

Back 102

(A) Yes, probably. §365(b)(3) requires similar financial conditions of assignee, prohibits substantial percentage decline in rent, any assignment would be subject to ALL provision, and assignment must not disrupt tenant mix.

Front 103

8-12: Debtor in bankruptcy owns the office building in which your law firm, Y, has its office. The lease agreement between Debtor and Y provides for: (1) payment of rental of $100k a month by Y; (2) exclusive use of floors 7-13 by Y; (3) option to rent the 6th floor; (4) maintenance and security service by D; (5) concierge service by D. At bankruptcy, which of the following can the Debtor “landlord” do: (A) Terminate the lease with Y. (B) Evict Y. (C) Change the amount of rent that Y pays. (D) None of the above.

Back 103

(A) Terminate the lease. §365(h)(1) D can reject the lease and Y could then treat it as a termination of the lease. HOWEVER, D cannot evict Y. If Y stays, its on all the same terms and conditions, D cannot raise rent.

Front 104

D lived 49 years in Oklahoma. D then moved to Arkansas for 1 year, then back to Oklahoma for 11 months before filing bankruptcy.
a) OK because he currently resides there.
b) OK b/c 180 days prior to BR he was domiced in OK.
c) AR because the debtor has not lived in OK for 2 years.
d) AR because the debtor resided there 365 days ago.

Back 104

11 U.S.C 522(b)(1)(3)(A)
B - If a debtor has resided in a location for less than two years, the debtor's domicile for BR purposed is where she resided 180 days prior to filing.

Front 105

D is filing BR. D has a homestead worth 2M in a state with no limit on homestead exemption. 3 yr and 6 mos prior, D made a 126K principal payment on his home. Is this payment avoidable under federal law? (True/False)

Back 105

11 USC 522p(1)(D)
NO, up to 125K within the previous 1215 days (3 yrs 3 mos).

Front 106

NBA star Dick Trickle files BR after being injured in a car accident. Trickle claims the proceeds of his lawsuit regarding the accident as exempt. (True/False) This will not hold up in BR court b/c the accident occurred prior to D's BR filing.

Back 106

11 USC 522(l)
False - The scenario does not indicate that his creditors objected to D's claim of an exemption. With no objection from a party in interest a claim of exemption is exempt.

Front 107

(True/False) If state law permits an exemption, the court may not deny discharge based upon the Debtor's use of the exemption.

Back 107

False

In Re: Tveten held that certain exemptions permitted under state law were fraudulent even though permitted.

Front 108

Mitch Janik gets a payday loan from CreditShark and secures it with a lien on his old hatchback that he uses as a work vehicle. Mitch later files BR. (True/False) CreditShark's lien in the hatchback may not be honored?

Back 108

True
11 USC 522(f)(1)(B)(ii) holds that if a lien impairs an exemption on "tools of the trade."

Front 109

Dale Bramer owns a home in the state of Taxus, that permits a $10,000 homestead exemption. D's house is subject to a single $35,000 lien from C due to a judgment in a tort lawsuit. Bramer files BR having $20,000 equity in his home. (True/False) C will get nothing.

Back 109

False - 11 USC 522(f)

11 USC 522(f)(2)(A)(i) - (iii) states that a lien will impair an exemption to the extent that ALL liens on the property and the exemption the debtor could claim exceed the value of the debtor's interest in the property. Here only $25,000 worth of C's judicial lien is avoidable.

Front 110

Deliliah files for BR on June 1, 2008 and the creditors meeting regarding her case scheduled for June 12, 19, and 27. (True/False) If a creditor files a 727(a) objection to discharge on August 27, 2008, the court will NOT consider it timely.

Back 110

True
Bankr.R. 4004(a) requires the objecction be filed no later than 60 days following the first creditors meeting

Front 111

(True/False) A debtor my not give up the right to discharge in a Chapter 11 bankruptcy.

Back 111

False
11 USC 727(a)(10) permits a court to deny discharge if a debtor has waived the right to discharge AFTER THE ORDER OF RELIEF.

Front 112

Debbie files for Ch. 7 BR on August 7. On November 5, she borrows $500 from CreditShark. On December 1, D obtains a discharge. (True/False) D's November 5 debt is discharged.

Back 112

False
11 USC 727(b) states that only debts arrising prior to the date of order for relief. In Ch. 7 the order for relief arises upon filing of the petition and therefore on August 7.

Front 113

Dilbert owes $90,000 for student loans, $15,000 to the IRS for back taxes, and $1500 for a business suit that he charged to his credit card. (True/False) Dilbert should not consider Chapter 7 bankruptcy.

Back 113

True
11 USC 523 . . .
(a)(1) IRS debt not dischargeable.
(a)(8)(A)(i) School loan not dischargeable
only $1500 would be dischargeable

Front 114

Larry the landlord has a provision in his commercial leases that allows him to terminate the lease immediately upon a tenants filing of bankruptcy.(True or False) The provision is unenforceable.

Back 114

True.
11 USC 365(e)(1)(B) says an executory contract may not be terminated notwithstanding a provision conditinoned upon the commencement of a case under this chapter.

Front 115

Depco Mall has a provision in its lease agreements generally barring the assignment of Kmart's lease in bankruptcy. (True/False) This provision would be enforceable if it only barred Kmart from assigning to a dissimilar business.

Back 115

True
11 USC ???

Front 116

(True/False) contract provisions forbidding assignment by a lessee are not applicable to a trustee in bankruptcy.

Back 116

True
11 USC 365(f)(3)

Front 117

If Delta Inc. files for bankruptcy, 30 days later the court enters an order confirming a plan. How long is Delta given to decide whether to assume or reject its US lease.
A) 120 days from plan confirmation
B) 120 days from filing
C) Still has to be determined
D) 30 Days total

Back 117

D
Delta needed to make its decision by the date of entry of the order confirming plan.11 USC 365(d)(4)(ii)

Front 118

Doc Holiday files bankruptcy under chapter 13. Prior to confirming a plan, the court orders the trustee to determine within two weeks which contracts it plans to reject.
(A) The order is proper because the court is permitted to order a specified time period.
(B) The order is improper because the trustee is given 120 days or the entry of an order confirming plan.
(C) The order is proper but only under chapter 13.
(D) The order is improper because no party requested the order.

Back 118

D

11 USC 365(d)(2) requires the court act upon the request of a party to the contract.

Front 119

Depko's trucking files bankruptcy on June 1, having 11 rigs under lease from Creditco, payment due on the first day of every month. (True/ False)While deciding whether to accept or reject these leases, D must pay rent due on August 1?

Back 119

True
11 USC 365(d)(5) makes the debtor responsible for rents ARISING 60 days after the order for relief ( occurs on voluntary filing). 61 days will have elapsed by August 1.

Front 120

Denton the dentist lives in the state of Bliss. Bliss statute 1024 imputes knowledge of employee fraud to employers for civil liability for Joint and Several Liability purposes. Denton's accountant has ruined him and he wishes to file for bankruptcy. Will his creditors have a valid objection to discharge for false pretenses? (Yes/No)

Back 120

No
A state's legal fiction that imputes knowledge to Denton will probably not meet the definition of "intent" in 11 USC (a)(2)(B)(iv)

Front 121

Who has the burden of proving a debtor has/not used a credit card with fraudulent intent.
(a) Creditor/ Card Company
(b) BR Trustee
(c) Debtor
(d) None of the above

Back 121

In Re: Bungert
A - Creditor has burden of establishing actual fraud 523(a)(2)(A) "Actual intent not to pay creditor"

Front 122

Debko is going out of business and wishes to declare BR. On a prior occasion a short term unsecured loan was secured from credit shark after the CFO of Debko told CreditBull's president "Our CEO is making a million dollars a day." (True or False) this will not be enough to prove fraudulent intent on the part of Debko.

Back 122

True
11 USC 523(a)(2)(A) excludes statement regarding an insiders financial condition.

Front 123

9-18: Dillon files for bankruptcy and obtains a discharge on a $4000 debt secured in his car. (True/False) Dillion may continue to use his car without reaffirmation of this debt?

Back 123

False

It's a secured debt

Front 124

9-19: (T/F) Reaffirmation agreements signed prior to BR discharge are valid.

Back 124

True
11 USC 524(c)(1) requires this.

Front 125

9-19: (T/F) Reaffirmation petitions must always be filed with the court.

Back 125

True
11 USC 524(c)(3)

Front 126

9-19: (T/F) A debtor without an attorney will be granted reaffirmation if it is in the best interest of the estate?

Back 126

False
11 USC 524 (c)(6)(A)(ii)

Front 127

Creditor DDS's patient Dale Debtor has recently filed for bankruptcy. C refuses to treat D's children unless D agrees to reaffirmation of D's outstanding unsecured claims. (T/F) C does not have to treat anyone he does not wish to.

Back 127

True -
D however cannot make C's treatment contingent on reaffirmation. 11 USC 524(a)(2)

Front 128

D files bankruptcy. Part of the estate is a 1 acre plot valued at $100 that accrues $1200 a year in property tax. The trustee wishes to abandon this property immediately rather than put it on the market. (T/F) She may abandon the property at her discretion.

Back 128

False
11 USC 554(a) permits the abandonment of property burdensome to the estate after notice and a hearing.

Front 129

9-23 Your client D files bankruptcy. Bankruptcy is listed on D's home mortgage as a "condition of default." D has not missed any actual payments. Is D in default under bankruptcy law.
A) Yes
B) No, 11 USC 722 does not apply to real property
C) No, the clause is invalid discrimination
D) No, 11 USC 722 applies only to personal property.

Back 129

A -Yes, the debtor is in default and additionally has no right to redeem. He must work things out on the mortgage holder's terms.

B and D are true except for the fact that the Debtor is in default.

Front 130

10-1:1
In a Chapter 13 case,the court may order reasonable compensation for the Debtor's attorney (T/F).

Back 130

True
see 11 USC 330(a)(4)(B)

Front 131

10-1:2
Notice and a hearing are not required to provide reasonable compensation for attorneys fees(T/F).

Back 131

False
see 11 USC 503(b)(2) states that 330(a) compensation is available "after notice and a hearing"

Front 132

10-1:3
Only domestic support claims take priority over an unsecured claim for attorneys fees.

Back 132

True
see 11 USC 507(a)(1) - (2) lists domestic support obligations followed by 503(b) administrative expenses as the first two priorities.

Front 133

10-1:4
In chapter 13 BR a plan can be confirmed that does not provide for reasonable attorney fees (T/F)?

Back 133

False
11 USC 1322(a) states "the plan shall --
. . .
(2) provide for the full payment, . . . of all claims entitled to priority under section 507. . . "

11 USC 1325(a)(1) requires plans to comply with applicable provisions of this title.

Front 134

10-1:5
Upon issuance of a discharge in a Ch. 13 filing, the court shall discharge any outstanding attorneys fees.(T/F)

Back 134

False
see 11 USC 1328(a)(2)
"the court shall grand the debtor a discharge of all debts . . ., except any debt --
. . .
(2) of the kind specified in [507(a)(2) - administrative expenses]."

Front 135

10-2:1
How many days does a D have to file a Ch.13 plan following the filing of the petition?
A) 90
B) 45
C) 30
D) 15

Back 135

D
Bankr. R 1007(c)

Front 136

10-2:2
Which of the following is not an acceptable date for the required meeting of the creditors held in a Ch 13 case?
A) 11 days following filing
B) 22 days following filing
C) 33 days following filing
D) any of these dates are fine
D)

Back 136

A
11 days is not acceptable b/c must be 20-50 days following filing

Bankr. R. 2003(a)

Front 137

10-2:3
After the meeting of the creditors, when should the court should confirm the plan within 1 month(T/F)

Back 137

False
Court has 45 days.

11 USC 1324(b)

Front 138

10-2:4
91 days following the meeting of the creditors in a Ch 13 case, the IRS files a new claim against the estate. They are too late(T/F)

Back 138

False
Governmental units have 180 days following the meeting of the creditors to file a claim. All others have only 90.

Bankr. R. 3002(c)

Front 139

10-2:5
When will a Ch. 13 debtor receive discharge?
A) When she makes the final plan payment
B) If she qualifies for a harship discharge.
C) A & B
D) none of the Above

Back 139

C
see 11 USC 1328.
Answers A) and B) represent the two situations in which a Ch. 13 debtor is entitled to discharge.

Front 140

The Federal Statutes assign bankruptcy courts only to hear cases (T/F)

Back 140

False
28 USC 157(b) Cases and core proceedings.

Front 141

What kind of matters can a BR judge hear.

Back 141

BR case, core proceedings, related matters. (the extent of related matters is not completely understood)