CIRA Principles & Practices 2

Question 1

Under Chapter 11, what is the primary purpose of the automatic stay?

Accepted Answer

To halt most collection actions against the debtor and its property

Answer

The automatic stay under 11 U.S.C. § 362 immediately halts most collection actions, lawsuits, and enforcement efforts against the debtor upon filing.

Question 2

A debtor-in-possession (DIP) loan is typically granted 'super-priority' status, meaning it:

Accepted Answer

Has priority over most pre-petition unsecured claims and may prime existing liens with court approval

Answer

DIP financing under § 364 can receive super-priority administrative expense status and, with court approval, can prime existing liens to attract post-petition lenders.

Question 3

Which financial metric is most commonly used to determine a company's enterprise value during a restructuring?

Accepted Answer

EBITDA multiple based on comparable transactions

Answer

Enterprise value in restructurings is typically derived by applying an EBITDA multiple from comparable company or transaction analyses.

Question 4

In a prepackaged bankruptcy, the plan of reorganization is:

Accepted Answer

Negotiated and voted on by creditors before the bankruptcy petition is filed

Answer

A prepackaged bankruptcy involves securing creditor votes on a reorganization plan before filing, significantly shortening the in-court process.

Question 5

What does the 'absolute priority rule' require in a confirmed Chapter 11 plan?

Accepted Answer

Senior classes must be paid in full before junior classes receive any distribution

Answer

The absolute priority rule mandates that senior creditor classes be paid in full before any junior class (including equity) receives a recovery.

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Principles & Practices 2