CBS Business Bankruptcy & Reorganization 3

Question 1

Which type of claim has the highest priority in a Chapter 11 case under § 507?

Accepted Answer

Administrative expenses of the estate incurred after the petition date

Answer

Under § 507(a)(2), administrative expenses—costs of administering the estate—have the highest priority among unsecured claims after domestic support obligations in § 507(a)(1).

Question 2

What standard governs approval of a Chapter 11 disclosure statement?

Accepted Answer

It must contain adequate information for a hypothetical reasonable investor to make an informed judgment about the plan

Answer

Under § 1125(a), a disclosure statement must provide 'adequate information'—enough for a reasonable creditor to evaluate the proposed plan.

Question 3

A Chapter 11 debtor seeks to sell substantially all its assets outside the ordinary course of business. What is required?

Accepted Answer

Court approval after notice and a hearing, typically through a § 363 sale

Answer

Sales outside the ordinary course of business require court authorization under § 363(b) after notice to creditors and an opportunity for hearing.

Question 4

What is 'DIP financing' and why is it critical in Chapter 11 cases?

Accepted Answer

Post-petition financing that provides the debtor with operating capital and often receives super-priority status

Answer

Debtor-in-possession financing under § 364 provides liquidity during reorganization and may be granted super-priority liens senior to existing creditors.

Question 5

In Chapter 11, what is the role of the Official Committee of Unsecured Creditors (UCC)?

Accepted Answer

To represent the interests of general unsecured creditors and participate in plan negotiations

Answer

The UCC under § 1102 is appointed by the U.S. Trustee and has standing to investigate the debtor, negotiate the plan, and retain professionals at estate expense.

(CBS) Certified Bankruptcy Specialist Practice Test

(CBS) Certified Bankruptcy Specialist Practice Test

CBS Business Bankruptcy & Reorganization 3