CFL Asset Tracing & Recovery 2

Question 1

What does the 'lowest intermediate balance rule' determine when tracing funds through a commingled bank account?

Accepted Answer

The maximum traceable amount, capped at the lowest balance the commingled account reached after the misappropriated funds were deposited

Answer

The lowest intermediate balance rule holds that a claimant cannot trace more than the lowest balance the commingled account reached after the misappropriated funds entered it, because funds spent during that low point are presumed to include the claimant's funds.

Question 2

In tracing misappropriated funds through multiple bank transfers, 'forward tracing' is best described as:

Accepted Answer

Following funds from the point of misappropriation forward through subsequent transactions to their current form

Answer

Forward tracing tracks funds in the direction they flow—from the moment of misappropriation through each subsequent transaction—to identify the current assets that represent the original misappropriated funds.

Question 3

How does the doctrine of 'unjust enrichment' support an asset recovery claim even absent a contract between the parties?

Accepted Answer

It provides a cause of action when one party has been enriched at another's expense without legal justification, regardless of privity

Answer

Unjust enrichment allows a claimant to recover assets or their monetary value whenever the defendant has been enriched at the claimant's expense under circumstances that the law considers unjust, without requiring a contractual relationship.

Question 4

Under UCC Article 9, what must a secured creditor do to establish priority over other creditors in personal property collateral?

Accepted Answer

File a UCC-1 financing statement in the appropriate public office to perfect the security interest

Answer

A secured creditor perfects a UCC Article 9 security interest in most types of personal property by filing a UCC-1 financing statement with the appropriate state filing office, establishing priority against subsequent creditors and bankruptcy trustees.

Question 5

Which provision of the Bankruptcy Code specifically authorizes a trustee to avoid fraudulent transfers made within two years before the bankruptcy petition?

Accepted Answer

Section 548 (fraudulent transfers and obligations)

Answer

Section 548 of the Bankruptcy Code authorizes the trustee to avoid both actually and constructively fraudulent transfers made within two years before the bankruptcy filing date.

CFL - Certified Financial Litigator Practice Test

CFL - Certified Financial Litigator Practice Test

CFL Asset Tracing & Recovery 2