CCP Bankruptcy & Insolvency in Credit Management 3

Question 1

Chapter 13 bankruptcy is primarily designed for:

Accepted Answer

Individuals with regular income who want to repay debts through a 3-to-5-year plan

Answer

Large corporations with complex capital structures

Answer

Municipalities seeking to restructure public debt

Answer

Family farmers and fishermen with seasonal income

Question 2

A secured creditor's claim in bankruptcy is generally limited to:

Accepted Answer

The value of the collateral, with any excess treated as an unsecured claim

Answer

The full face value of the debt regardless of collateral value

Answer

50% of the collateral value plus accrued interest

Answer

The original principal balance excluding fees and penalties

Question 3

A Section 363 sale in bankruptcy allows the debtor to:

Accepted Answer

Sell assets outside the ordinary course of business free and clear of liens, subject to court approval

Answer

Transfer executory contracts to third parties without creditor consent

Answer

Reduce secured creditor claims to the fair market value of collateral

Answer

Assume or reject unexpired leases within 60 days of filing

Question 4

Which of the following debts is generally NON-DISCHARGEABLE in an individual Chapter 7 bankruptcy?

Accepted Answer

Student loans absent undue hardship

Answer

Unsecured credit card balances

Answer

Medical bills incurred before filing

Answer

Personal loans from banks

Question 5

From a credit management perspective, which early warning signal most strongly indicates a customer may be approaching insolvency?

Accepted Answer

Sudden increase in the number of disputed invoices combined with deteriorating DSO

Answer

Switching from a net-30 to a net-45 payment term request

Answer

Consistently paying early to take advantage of early payment discounts

Answer

Requesting a higher credit limit after a year of on-time payments

Question 6

When a company files for Chapter 11, what happens to executory contracts and unexpired leases?

Accepted Answer

The debtor in possession may assume or reject them, subject to court approval

Answer

They are automatically terminated as of the petition date

Answer

They are transferred to the bankruptcy trustee for renegotiation

Answer

They must be paid current within 30 days or they automatically terminate

Question 7

A credit professional receives a notice that a customer has filed Chapter 11. Which action should the credit professional take FIRST?

Accepted Answer

Immediately demand return of any goods shipped in the last 20 days via a reclamation demand

Answer

Continue shipping goods on the same credit terms as before the filing

Answer

Write off the entire accounts receivable balance as a bad debt immediately

Answer

File a preference lawsuit to recover all payments received in the past 90 days