PCS Bankruptcy Stay & Proof of Claim 2 — Questions and Answers
Question 1: Which type of bankruptcy filing triggers an automatic stay that does NOT discharge debts at the end of the case?
- Chapter 7
- Chapter 11
- Chapter 13
- Chapter 12 (Correct answer)
Correct answer: Chapter 12
Chapter 12 (family farmer/fisherman) triggers an automatic stay but ultimately leads to a repayment plan, not a discharge in the same manner as Chapter 7.
Question 2: A creditor receives notice of a debtor's Chapter 7 bankruptcy but continues to call the debtor demanding payment. This action violates:
- The Fair Debt Collection Practices Act only
- The automatic stay under 11 U.S.C. § 362 (Correct answer)
- The debtor's right to a discharge
- State collection law only
Correct answer: The automatic stay under 11 U.S.C. § 362
Continuing collection calls after receiving bankruptcy notice violates the automatic stay under 11 U.S.C. § 362, regardless of other laws that may also apply.
Question 3: On a proof of claim, what does 'priority unsecured claim' mean?
- A claim backed by collateral with high value
- An unsecured debt entitled to payment before general unsecured claims (Correct answer)
- A claim filed before the bar date
- A claim that cannot be discharged in bankruptcy
Correct answer: An unsecured debt entitled to payment before general unsecured claims
A priority unsecured claim (e.g., certain taxes, wages) is entitled to payment ahead of general unsecured creditors in the distribution waterfall.
Question 4: A collection agency that is listed as a creditor in a Chapter 13 case does NOT file a proof of claim. What typically happens to that claim?
- It is automatically paid at full value
- It may be disallowed or receive no distribution (Correct answer)
- The trustee files it on their behalf automatically
- The debtor must pay it outside the plan
Correct answer: It may be disallowed or receive no distribution
A creditor who fails to file a timely proof of claim in Chapter 13 may be disallowed and receive no distribution under the plan.
Question 5: Which court has exclusive jurisdiction over automatic stay disputes in a bankruptcy case?
- State civil court
- Federal district court sitting in diversity
- The bankruptcy court presiding over the case (Correct answer)
- The court that originally issued the debt judgment
Correct answer: The bankruptcy court presiding over the case
The bankruptcy court presiding over the case has exclusive jurisdiction to enforce, modify, or lift the automatic stay.
Question 6: A secured creditor files a motion for relief from the automatic stay. The court grants it. What can the creditor now do?
- Discharge the debt entirely
- Pursue the collateral securing the debt outside bankruptcy (Correct answer)
- File a priority claim against estate assets
- Sue the debtor personally for the deficiency only
Correct answer: Pursue the collateral securing the debt outside bankruptcy
Lifting the stay on a secured creditor's collateral allows that creditor to repossess or foreclose on the collateral outside of the bankruptcy proceeding.
Question 7: Under the Bankruptcy Code, which of the following is a basis for a creditor to object to a proof of claim filed by another creditor?
- The claim is for a business debt, not consumer debt
- The claim amount is unenforceable under applicable law (Correct answer)
- The claim was filed by an attorney, not the creditor directly
- The claim is denominated in a foreign currency
Correct answer: The claim amount is unenforceable under applicable law
Under 11 U.S.C. § 502(b), a court shall disallow a claim if it is unenforceable under applicable law or agreement.
PCS Bankruptcy Stay & Proof of Claim 2
Which type of bankruptcy filing triggers an automatic stay that does NOT discharge debts at the end of the case?