CCDS CCDS Consumer Bankruptcy & Debt Settlement 1 — Questions and Answers
Question 1: Under Chapter 7 bankruptcy in the U.S., what is the typical timeframe for receiving a discharge of eligible debts?
- 3 to 6 months (Correct answer)
- 12 to 18 months
- 24 to 36 months
- 5 years
Correct answer: 3 to 6 months
Chapter 7 bankruptcy typically results in a discharge of eligible unsecured debts within 3 to 6 months of filing.
Question 2: Which type of bankruptcy allows individuals with regular income to repay debts over a 3- to 5-year plan?
- Chapter 11
- Chapter 13 (Correct answer)
- Chapter 7
- Chapter 9
Correct answer: Chapter 13
Chapter 13 bankruptcy enables individuals with regular income to propose a repayment plan lasting 3 to 5 years.
Question 3: What is the 'means test' in Chapter 7 bankruptcy primarily used to determine?
- Whether the debtor qualifies based on income (Correct answer)
- The value of non-exempt assets
- The amount owed to secured creditors
- The debtor's credit score
Correct answer: Whether the debtor qualifies based on income
The means test compares the debtor's income to the state median to determine eligibility for Chapter 7.
Question 4: Which of the following debts is generally NON-dischargeable in bankruptcy?
- Credit card debt
- Medical bills
- Federal student loans (Correct answer)
- Personal loans
Correct answer: Federal student loans
Federal student loans are generally non-dischargeable in bankruptcy unless the debtor proves undue hardship.
Question 5: In a debt settlement arrangement, what typically happens to the forgiven portion of the debt?
- It is reported as a tax-exempt gain
- It may be treated as taxable income by the IRS (Correct answer)
- It is automatically applied to future credit balances
- It is forgiven with no financial consequences
Correct answer: It may be treated as taxable income by the IRS
The IRS generally treats forgiven debt as taxable income, and creditors must issue a 1099-C for amounts of $600 or more.
Question 6: What is the automatic stay in bankruptcy proceedings?
- A court order requiring the debtor to appear in person
- An immediate halt to most collection actions upon filing (Correct answer)
- A freeze on the debtor's bank accounts
- A delay in the discharge process
Correct answer: An immediate halt to most collection actions upon filing
The automatic stay immediately stops most collection actions, lawsuits, and foreclosures upon the filing of a bankruptcy petition.
CCDS CCDS Consumer Bankruptcy & Debt Settlement 1
Under Chapter 7 bankruptcy in the U.S., what is the typical timeframe for receiving a discharge of eligible debts?