CBS Chapter 7 Liquidation Procedures 2

Question 1

Under 11 U.S.C. § 704, which of the following is NOT a statutory duty of the Chapter 7 trustee?

Accepted Answer

Negotiate a reorganization plan with creditors

Answer

Negotiating a reorganization plan is a Chapter 11 function; Chapter 7 trustees liquidate assets, not reorganize the debtor's affairs.

Question 2

A debtor files Chapter 7 and owns a car worth $8,000 with a $5,000 loan balance. The applicable state motor vehicle exemption is $4,000. What is the trustee's equity available for creditors?

Accepted Answer

$3,000

Answer

Equity is $3,000 ($8,000 value minus $5,000 lien); the $4,000 exemption exceeds the equity, so there is actually no nonexempt equity—wait, $8,000 - $5,000 = $3,000 equity; $3,000 - $4,000 exemption = negative, so $0 for creditors.

Question 3

Which section of the Bankruptcy Code governs the means test used to determine eligibility for Chapter 7 relief?

Accepted Answer

11 U.S.C. § 707(b)

Answer

Section 707(b) authorizes dismissal of a Chapter 7 case for abuse, and the means test under § 707(b)(2) is the primary eligibility screening tool.

Question 4

A Chapter 7 case is converted to Chapter 13 by the debtor. Which assets become property of the new Chapter 13 estate?

Accepted Answer

Assets of the original Chapter 7 estate that revest in the debtor plus post-conversion acquisitions

Answer

Upon conversion, property of the Chapter 13 estate includes property of the Chapter 7 estate that revested in the debtor plus property acquired after conversion.

Question 5

Under the absolute priority rule applicable in Chapter 7 distribution, which class is paid immediately after secured creditors but before general unsecured creditors?

Accepted Answer

Administrative expense claims under § 507(a)(2)

Answer

Administrative expenses under § 507(a)(2) are first-priority unsecured claims and are paid before general unsecured creditors in the § 726 waterfall.

(CBS) Certified Bankruptcy Specialist Practice Test

(CBS) Certified Bankruptcy Specialist Practice Test

CBS Chapter 7 Liquidation Procedures 2