Bankruptcy Law Flashcards
6 cards from real NALA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Bankruptcy Law flashcards as text
Under the U.S. Bankruptcy Code, what is the 'automatic stay'?
Answer: An injunction that immediately halts most collection actions, lawsuits, and foreclosures against the debtor upon filing.
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.
A client with primarily consumer debts wants to eliminate unsecured debts entirely through bankruptcy. Which chapter of the Bankruptcy Code is MOST appropriate?
Answer: Chapter 7 — Liquidation
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.
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?
Answer: The Means Test
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.
Under Chapter 13 bankruptcy, how long may a debtor's repayment plan last?
Answer: 3 to 5 years
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.
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?
Answer: The Chapter 7 trustee
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.
Which of the following debts is generally NON-DISCHARGEABLE in a Chapter 7 bankruptcy?
Answer: Student loans (absent undue hardship)
Under 11 U.S.C. § 523, student loans are non-dischargeable in bankruptcy unless the debtor proves 'undue hardship' — a very difficult standard. Credit card debt, medical bills, and utility bills are general unsecured debts that are typically dischargeable in Chapter 7.