CBA CBA Asset Administration & Liquidation 2

Question 1

What is 'surcharge' under 11 U.S.C. § 506(c), and who may assert it?

Accepted Answer

Recovery from collateral of reasonable costs incurred to preserve or dispose of it

Answer

Section 506(c) allows the trustee to surcharge a secured creditor's collateral for the reasonable and necessary costs of preserving or disposing of that property for the creditor's benefit.

Question 2

In a Chapter 7 liquidation, which waterfall correctly reflects the priority of distributions?

Accepted Answer

Secured → Administrative → Priority Unsecured → General Unsecured → Equity

Answer

Distributions flow first to secured creditors (from collateral), then administrative expenses, then priority unsecured claims, then general unsecured claims, and finally to equity holders.

Question 3

What is the significance of a 'free and clear' sale under 11 U.S.C. § 363(f)?

Accepted Answer

Assets are sold without any liens, claims, or encumbrances attaching to the property

Answer

A § 363(f) sale transfers property free and clear of liens and encumbrances, which then attach to the sale proceeds rather than the property itself.

Question 4

Which of the following is a valid defense to a preference action under 11 U.S.C. § 547(c)?

Accepted Answer

The payment was made in the ordinary course of business

Answer

The ordinary course of business defense under § 547(c)(2) protects transfers made consistent with prior dealings between the parties or standard industry practice.

Question 5

What is the trustee's 'strong arm' power under 11 U.S.C. § 544?

Accepted Answer

Ability to assume the status of a hypothetical lien creditor to avoid unperfected security interests

Answer

The strong arm power allows the trustee to step into the shoes of a hypothetical judgment lien creditor, defeating security interests that were not properly perfected before the petition.

(CBA) Certified Bankruptcy Administrator Practice Test

(CBA) Certified Bankruptcy Administrator Practice Test

CBA CBA Asset Administration & Liquidation 2