CIRA Legal & Regulatory Environment 3

Question 1

A secured creditor holds a lien on equipment worth $500,000 but is owed $800,000. Under Section 506, what is the creditor's status regarding the $300,000 deficiency?

Accepted Answer

Two claims: $500,000 secured and $300,000 general unsecured

Answer

Section 506(a) bifurcates an undersecured claim into a secured claim equal to collateral value and an unsecured claim for the deficiency.

Question 2

What is a 'preference' under Section 547 of the Bankruptcy Code, and what is the general look-back period for non-insiders?

Accepted Answer

A transfer to a creditor on account of an antecedent debt within 90 days before filing

Answer

A preference under Section 547 is a transfer to a creditor on account of antecedent debt made within 90 days before filing while the debtor was insolvent.

Question 3

Which test is used under Section 548 to determine if a transfer was made for less than reasonably equivalent value?

Accepted Answer

The 'reasonably equivalent value' test based on fair market exchange

Answer

Section 548 avoids transfers where the debtor received less than reasonably equivalent value in exchange while insolvent or rendered insolvent by the transfer.

Question 4

In a bankruptcy case, what is a 'proof of claim' and when must it typically be filed?

Accepted Answer

A written statement filed by a creditor asserting a right to payment from the estate

Answer

A proof of claim is a written statement filed by a creditor pursuant to Bankruptcy Rule 3001, asserting the creditor's right to payment from the estate by the claims bar date.

Question 5

What does 'adequate protection' mean in the context of a secured creditor's rights during a Chapter 11 case?

Accepted Answer

Compensation to a secured creditor to protect against diminution in collateral value during the stay

Answer

Adequate protection under Section 361 compensates secured creditors for the diminution in collateral value resulting from the automatic stay or use of cash collateral.

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Legal & Regulatory Environment 3