Bankruptcy and Insolvency Flashcards

Which type of property is generally protected from liquidation in a Chapter 7 bankruptcy through federal or state exemptions?

Answer: Equity in a primary residence (homestead exemption)

The homestead exemption protects a specified amount of equity in a debtor's primary residence from being liquidated in Chapter 7.

What is the 'means test' in the context of Chapter 7 bankruptcy?

Answer: A calculation comparing income to state median to determine eligibility

The means test compares the debtor's average monthly income to the state median income to determine whether Chapter 7 is available or if Chapter 13 is required.

Under the Bankruptcy Code, which of the following debts is NON-dischargeable in a Chapter 7 case?

Answer: Domestic support obligations (child support/alimony)

Domestic support obligations such as child support and alimony are explicitly non-dischargeable under 11 U.S.C. § 523.

What is a 'reaffirmation agreement' in bankruptcy?

Answer: A debtor's voluntary agreement to remain personally liable on a specific debt

A reaffirmation agreement is a voluntary contract where the debtor agrees to remain personally liable for a debt that would otherwise be discharged.

In a Chapter 13 repayment plan, how long is the maximum repayment period allowed by law?

Answer: 5 years

Chapter 13 repayment plans may not exceed 5 years (60 months) under the Bankruptcy Code.

Which legal concept prevents creditors from taking collection actions once a bankruptcy petition is filed?

Answer: Automatic stay

The automatic stay (11 U.S.C. § 362) immediately halts most collection actions, lawsuits, foreclosures, and wage garnishments upon filing.

A client has primarily student loan debt. What should a financial counselor advise regarding bankruptcy?

Answer: Student loans are non-dischargeable unless undue hardship is proven

Student loans are generally non-dischargeable in bankruptcy unless the debtor proves undue hardship through an adversary proceeding.