NALA Bankruptcy Law

Question 1

Under the U.S. Bankruptcy Code, what is the 'automatic stay'?

Accepted Answer

An injunction that immediately halts most collection actions, lawsuits, and foreclosures against the debtor upon filing.

Answer

The automatic stay (11 U.S.C. § 362) takes effect the moment a bankruptcy petition is filed and immediately prohibits most creditors from continuing collection efforts, wage garnishments, foreclosures, and lawsuits against the debtor. It is one of the most powerful protections bankruptcy provides.

Question 2

A client with primarily consumer debts wants to eliminate unsecured debts entirely through bankruptcy. Which chapter of the Bankruptcy Code is MOST appropriate?

Accepted Answer

Chapter 7 — Liquidation

Answer

Chapter 7 is a liquidation bankruptcy that allows eligible individual debtors to discharge most unsecured debts (credit cards, medical bills) relatively quickly. Chapter 11 is primarily for business reorganization; Chapter 12 is for family farmers and fishermen; Chapter 9 is for municipalities.

Question 3

Which test must individual debtors pass to be eligible to file Chapter 7 bankruptcy under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?

Accepted Answer

The Means Test

Answer

BAPCPA introduced the 'means test,' which compares the debtor's average monthly income to the state median income and, if above it, calculates disposable income to determine whether Chapter 7 is available or whether the debtor must file Chapter 13 and repay creditors through a plan.

Question 4

Under Chapter 13 bankruptcy, how long may a debtor's repayment plan last?

Accepted Answer

3 to 5 years

Answer

Chapter 13 plans must be 3 years if the debtor's income is below the state median, and may extend to 5 years if income is at or above the state median. Plans exceeding 5 years are not permitted under the Bankruptcy Code.

Question 5

In a bankruptcy case, which party is appointed to administer the debtor's estate, liquidate non-exempt assets, and distribute proceeds to creditors in a Chapter 7 case?

Accepted Answer

The Chapter 7 trustee

Answer

A Chapter 7 trustee (a private individual appointed from a panel) administers the bankruptcy estate: collecting and liquidating non-exempt assets and distributing proceeds to creditors in the priority order set by the Code. The bankruptcy judge oversees the legal proceedings; the U.S. Trustee is a DOJ official who supervises trustees; 'debtor-in-possession' is a Chapter 11 concept.

(NALA) National Association of Legal Assistants Certification Practice Test

(NALA) National Association of Legal Assistants Certification Practice Test

NALA Bankruptcy Law