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

Chapter 13 allows individuals with regular income to propose a repayment plan lasting 3 to 5 years, enabling them to catch up on arrears and keep property they would otherwise lose in Chapter 7.

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

Under the Bankruptcy Code, a secured claim is allowed only to the extent of the collateral value; if the debt exceeds collateral value, the deficiency becomes an unsecured claim — this is known as bifurcation.

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

A 363 sale permits the bankruptcy estate to sell assets free and clear of most liens and encumbrances with court approval, often used to quickly sell distressed businesses to preserve going-concern value.

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

Student loan debt is generally non-dischargeable in bankruptcy unless the debtor can demonstrate 'undue hardship' under a strict judicial standard, unlike most unsecured consumer debts.

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

A sudden spike in invoice disputes coupled with lengthening DSO often indicates cash flow stress, as struggling debtors create disputes to buy time before insolvency.

(CCP) Certified Credit Professional Practice Test

(CCP) Certified Credit Professional Practice Test

CCP Bankruptcy & Insolvency in Credit Management 3