CFL Bankruptcy & Creditor Rights 2

Question 1

In bankruptcy litigation, a 'lift stay' motion filed by a secured creditor is most likely to succeed when:

Accepted Answer

The debtor has no equity in the collateral and the property is not necessary for reorganization

Answer

Section 362(d)(2) permits relief from the stay when the debtor has no equity in the property AND the property is not necessary for an effective reorganization.

Question 2

Under Article 9 of the UCC, a secured creditor must perfect its security interest in most personal property collateral by:

Accepted Answer

Filing a financing statement (UCC-1) in the appropriate state office

Answer

For most Article 9 collateral, filing a UCC-1 financing statement in the debtor's state of organization or residence is the standard method of perfection.

Question 3

A Chapter 7 trustee discovers the debtor made a $500,000 transfer to a family member 18 months before the bankruptcy filing for no consideration. The trustee would seek to avoid this transfer under:

Accepted Answer

Section 548 actual fraudulent transfer or state fraudulent transfer law

Answer

A transfer for no consideration (no reasonably equivalent value) with evidence of intent to hinder creditors is a classic actual fraudulent transfer under Section 548 or applicable state law.

Question 4

The 'strong-arm' power under Bankruptcy Code Section 544(a) allows the bankruptcy trustee to avoid any transfer that could be avoided by:

Accepted Answer

A hypothetical lien creditor who perfected their lien on the petition date

Answer

Section 544(a) gives the trustee the rights of a hypothetical judicial lien creditor who perfected on the petition date, allowing avoidance of unperfected liens.

Question 5

In a bankruptcy avoidance action for preferences, the 'new value' defense under Section 547(c)(4) allows a creditor to offset the preference by:

Accepted Answer

The value of new credit or goods extended to the debtor after the preferential transfer

Answer

New value advanced after a preferential payment reduces the avoidable amount because the estate received an offsetting benefit from the creditor's subsequent extension of credit.

CFL - Certified Financial Litigator Practice Test

CFL - Certified Financial Litigator Practice Test

CFL Bankruptcy & Creditor Rights 2