CIRA Principles & Practices 3

Question 1

Under the Bankruptcy Code, a 'preference payment' subject to avoidance is generally a transfer made to a creditor:

Accepted Answer

Within 90 days before filing (or one year for insiders) on account of an antecedent debt while the debtor was insolvent

Answer

Preference payments under § 547 are transfers within 90 days (one year for insiders) that improve a creditor's position over what they'd receive in a Chapter 7 liquidation.

Question 2

What is a 'fraudulent transfer' in the context of insolvency law?

Accepted Answer

A transfer made with intent to hinder creditors or for less than reasonably equivalent value while insolvent

Answer

Fraudulent transfers under § 548 include transfers made with actual intent to defraud creditors or constructively fraudulent transfers where the debtor received less than reasonably equivalent value while insolvent.

Question 3

In restructuring, 'equitable subordination' is a doctrine that allows a court to:

Accepted Answer

Subordinate a creditor's claim due to inequitable conduct that harmed other creditors

Answer

Equitable subordination under § 510(c) permits courts to subordinate a creditor's claim as a remedy for misconduct that caused harm to other creditors.

Question 4

Which test does the Bankruptcy Code apply to confirm that a reorganization plan is feasible?

Accepted Answer

The plan must not be likely to be followed by liquidation or further reorganization

Answer

Under § 1129(a)(11), a plan is feasible if confirmation is not likely to be followed by liquidation or the need for further reorganization, i.e., the reorganized company can meet its obligations.

Question 5

A 'stalking horse' bid in a § 363 asset sale serves primarily to:

Accepted Answer

Set a floor price and terms for competitive bidding, protecting the process

Answer

A stalking horse bidder establishes a minimum price and deal terms, encouraging higher competing bids while receiving bid protections such as a break-up fee.

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

(CIRA) Certified Insolvency & Restructuring Advisor Practice Test

CIRA Principles & Practices 3