CCP Bankruptcy & Insolvency in Credit Management

Question 1

Which chapter of the U.S. Bankruptcy Code is primarily used by businesses seeking reorganization while continuing operations?

Accepted Answer

Chapter 11

Answer

Chapter 11 allows businesses to restructure debts and continue operations under a court-approved plan of reorganization.

Question 2

What is an 'automatic stay' in bankruptcy proceedings?

Accepted Answer

A court injunction that halts most collection actions against the debtor upon filing

Answer

The automatic stay immediately stops virtually all collection efforts, lawsuits, and creditor actions against the debtor upon the filing of a bankruptcy petition.

Question 3

Under Chapter 7 bankruptcy liquidation, what is the primary role of the trustee?

Accepted Answer

Liquidate non-exempt assets and distribute proceeds to creditors

Answer

In Chapter 7, the trustee collects and sells the debtor's non-exempt assets, then distributes the proceeds to creditors according to statutory priority.

Question 4

A 'preference payment' in bankruptcy refers to a transfer made by the debtor:

Accepted Answer

To an unsecured creditor within 90 days before filing that improves their position over other creditors

Answer

A preference is a payment to a creditor within 90 days (or 1 year for insiders) before filing that enables that creditor to receive more than they would in liquidation, making it potentially recoverable by the trustee.

Question 5

Which of the following creditor classes has the HIGHEST priority in a Chapter 7 liquidation distribution?

Accepted Answer

Secured creditors with perfected liens

Answer

Secured creditors with perfected liens are paid first from the collateral proceeds, ahead of unsecured and subordinated creditors, and far ahead of equity holders.

(CCP) Certified Credit Professional Practice Test

(CCP) Certified Credit Professional Practice Test

CCP Bankruptcy & Insolvency in Credit Management