FiCEP Bankruptcy and Insolvency 2

Question 1

In a bankruptcy case, what is a 'proof of claim'?

Accepted Answer

A form filed by a creditor stating the amount owed and the basis for the debt

Answer

A proof of claim is a written statement filed by a creditor in a bankruptcy case that asserts the creditor's right to receive payment from the debtor's bankruptcy estate.

Question 2

How long does a Chapter 7 bankruptcy typically remain on a consumer's credit report?

Accepted Answer

10 years

Answer

A Chapter 7 bankruptcy filing remains on a consumer's credit report for 10 years from the filing date, as permitted under the Fair Credit Reporting Act (FCRA).

Question 3

What is the difference between 'secured' and 'unsecured' debt in the context of bankruptcy?

Accepted Answer

Secured debt is backed by collateral; unsecured debt has no collateral and relies only on the borrower's promise to repay

Answer

Secured debt is tied to specific collateral (like a car or home) that the creditor can repossess if unpaid, while unsecured debt (like credit cards) has no collateral backing.

Question 4

What is a 'reaffirmation agreement' in bankruptcy?

Accepted Answer

A voluntary agreement where a debtor agrees to remain personally liable for a specific debt that would otherwise be discharged

Answer

A reaffirmation agreement is a legally binding contract in which a Chapter 7 debtor voluntarily agrees to continue paying a specific debt (such as a car loan) in exchange for keeping the collateral.

Question 5

Which bankruptcy chapter is most commonly used by businesses to reorganize debts while continuing operations?

Accepted Answer

Chapter 11

Answer

Chapter 11 allows businesses (and some high-debt individuals) to restructure debts through a reorganization plan while continuing to operate, subject to court and creditor approval.

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP - Financial Counseling Certification Program Practice Test

FiCEP Bankruptcy and Insolvency 2