Bankruptcy and Insolvency Flashcards
7 cards from real FICEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Bankruptcy and Insolvency flashcards as text
Which bankruptcy chapter is specifically designed for family farmers and family fishermen?
Answer: Chapter 12
Chapter 12 was created specifically to provide a reorganization option for family farmers and family fishermen with regular income.
What is a 'preference payment' in bankruptcy law?
Answer: A payment a debtor makes to a favored creditor shortly before filing that the trustee may recover
A preference payment is a transfer made to a creditor within 90 days before filing (or 1 year for insiders) that the trustee can avoid to ensure equitable treatment among creditors.
In the priority order of claims in a bankruptcy estate, which category is paid FIRST?
Answer: Administrative expenses of the bankruptcy case
Administrative expenses of the bankruptcy case (trustee fees, attorney fees, etc.) are first-priority unsecured claims under 11 U.S.C. § 507(a)(2), paid before most other claims.
What is the primary difference between 'insolvency' in the balance-sheet sense and 'cash-flow insolvency'?
Answer: Balance-sheet insolvency means total liabilities exceed total assets; cash-flow insolvency means inability to pay debts as they come due
Balance-sheet insolvency occurs when total liabilities exceed total assets, while cash-flow insolvency occurs when a debtor cannot meet current obligations as they become due.
Which of the following is an example of a 'fraudulent transfer' that a bankruptcy trustee could avoid?
Answer: Transferring a house to a family member for no consideration one year before filing
Transferring property to a family member for no fair consideration (no or below-market value) before bankruptcy is a classic fraudulent transfer that trustees can reverse.
What does the term 'cramdown' mean in the context of Chapter 13 bankruptcy?
Answer: Forcing a secured creditor to accept the collateral's current market value instead of the full loan balance
A cramdown allows a Chapter 13 debtor to reduce a secured claim to the current market value of the collateral, with the remaining balance treated as unsecured debt.
Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, what is required before a debtor can file for bankruptcy?
Answer: Completion of a credit counseling course from an approved agency within 180 days before filing
BAPCPA requires debtors to complete an approved credit counseling course within 180 days before filing a bankruptcy petition.