through 29 are based on the following:

Dart, Inc., a closely held corporation, was petitioned involuntarily into bankruptcy under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code. Dart contested the petition.

Dart has not been paying its business debts as they became due, has defaulted on its mortgage loan payments, and owes back taxes to the IRS. The total cash value of Dart’s bankruptcy estate after the sale of all assets and payment of administration expenses is $100,000.

Dart has the following creditors:

Fracon Bank is owed $75,000 principal and accrued interest on a mortgage loan secured by Dart’s real property. The property was valued at and sold, in bankruptcy, for $70,000.

The IRS has a $12,000 recorded judgment for unpaid corporate income tax.

JOG Office Supplies has an unsecured claim of

$3,000 that was timely filed.

Nanstar Electric Co. has an unsecured claim of

$1,200 that was not timely filed.

Decoy Publications has a claim of $14,000, of which $2,000 is secured by Dart’s inventory that was valued and sold, in bankruptcy, for $2,000.

The claim was timely filed.

24. Which of the following creditors must join in the filing of the involuntary petition?

I. JOG Office Supplies II. Nanstar Electric Co.

III. Decoy Publications a. I, II and III.

b. II and III.

c. I and II.

d. III only.

25. Which of the following statements would correctly describe the result of Dart’s opposing the petition?

a. Dart will win because the petition should have been filed under Chapter 11.

b. Dart will win because there are not more than 12 creditors.

c. Dart will lose because it is not paying its debts as they become due.

d. Dart will lose because of its debt to the IRS.

26. Which of the following events will follow the filing of the Chapter 7 involuntary petition?

A stay against A trustee creditor collection

will be proceedings

appointed goes into effect

a. Yes Yes

b. Yes No

c. No Yes

d. No No

For Items 27 through 29 assume that the bankruptcy estate was distributed.

27. What dollar amount would Nanstar Electric Co.

receive?

a. $0 b. $800 c. $1,000 d. $1,200

28. What total dollar amount would Fracon Bank receive on its secured and unsecured claims?

a. $70,000 b. $72,000 c. $74,000 d. $75,000

7Q-4

29. What dollar amount would the IRS receive?

a. $0 b. $8,000 c. $10,000 d. $12,000

__________

30. In a voluntary bankruptcy proceeding under Chapter 7 of the Federal Bankruptcy Code, which of the following claims incurred within 180 days prior to filing will be paid first?

a. Unsecured federal taxes.

b. Utility bills up to $1,000.

c. Voluntary contributions to employee benefit plans.

d. Employee vacation and sick pay up to $4,300 per employee.

31. Which of the following types of claims would be paid first in the distribution of a bankruptcy estate under the liquidation provisions of Chapter 7 of the Federal Bankruptcy Code if the petition was filed July 15, 1993?

a. A secured debt properly perfected on March 20, 1993.

b. Inventory purchased and delivered August 1, 1993.

c. Employee wages due April 30, 1993.

d. Federal tax lien filed June 30, 1993.

32. Rolf, an individual, filed a voluntary petition in bankruptcy. A general discharge in bankruptcy will be denied if Rolf

a. Negligently made preferential transfer to certain creditors within 90 days of filing the petition.

b. Unjustifiably failed to preserve Rolf’s books and records.

c. Filed a fraudulent federal income tax return two years prior to filing the petition.

d. Obtained a loan by using financial statements that Rolf knew were false.

33. Under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code, a debtor will be denied a discharge in bankruptcy if the debtor

a. Fails to list a creditor.

b. Owes alimony and child support payments.

c. Cannot pay administration expenses.

d. Refuses to adequately explain a loss of assets.

34. Eagle Corp. is a general creditor of Dodd. Dodd filed a petition in bankruptcy under the liquidation provisions of the Bankruptcy Code. Eagle wishes to have the bankruptcy court either deny Dodd a general discharge or not have its debt discharged. The discharge will be granted and it will include Eagle’s debt even if a. Dodd filed for and received a previous discharge

in bankruptcy under the liquidation provisions within five years of the filing of the present petition.

b. Eagle’s debt is unscheduled.

c. Eagle was a secured creditor not fully satisfied from the proceeds obtained on disposition of the collateral.

d. Dodd unjustifiably failed to preserve the records from which Dodd’s financial condition might be ascertained.

35. Which of the following claims will not be discharged in bankruptcy?

a. A claim that arises from alimony or maintenance.

b. A claim that arises out of the debtor’s breach of a contract.

c. A claim brought by a secured creditor that remains unsatisfied after the sale of the collateral.

d. A claim brought by a judgment creditor whose judgment resulted from the debtor’s negligent operation of a motor vehicle.

36. Larson, an unemployed carpenter, filed for voluntary bankruptcy on August 14, 1990. Larson’s liabilities are listed below.

Credit card charges due May 2, 1989 $3,000 Bank loan incurred June 1990 5,000 Medical expenses incurred June 1983 7,000

Alimony due during 1988 1,000

Under the provisions of Chapter 7 of the Federal Bankruptcy Code, Larson’s discharge will not apply to the unpaid

a. Credit card charges.

b. Bank loan.

c. Medical expenses.

d. Alimony.

37. A claim will not be discharged in a bankruptcy proceeding if it

a. Is brought by a secured creditor and remains unsatisfied after receipt of the proceeds from the disposition of the collateral.

b. Is for unintentional torts that resulted in bodily injury to the claimant.

c. Arises from an extension of credit based upon false representations.

d. Arises out of the breach of a contract by the debtor.

7Q-5

38. In general, which of the following debts will be discharged under the voluntary liquidation provisions of Chapter 7 of the Federal Bankruptcy Code?

a. A debt due to the negligence of the debtor arising before filing the bankruptcy petition.

b. Alimony payments owed the debtor’s spouse under a separation agreement entered into two years before the filing of the bankruptcy petition.

c. A debt incurred more than 90 days before the filing of the bankruptcy petition and not disclosed in the petition.

d. Income taxes due within two years before the filing of the bankruptcy petition.

39. Which of the following acts by a debtor could result in a bankruptcy court revoking the debtor’s discharge?

I. Failure to list one creditor.

II. Failure to answer correctly material questions on the bankruptcy petition.

a. I only.

b. II only.

c. Both I and II.

d. Neither I nor II.

7Q-6

Chapter Seven: Bankruptcy