R6 M2 - Bankruptcy: Part II

Question 1

While a corporation or a partnership may voluntarily or involuntarily be petitioned into a Chapter 7 bankruptcy, a corporation or a partnership is “dissolved,” while an individual is “discharged.”

A chapter 7 discharge may be obtained once every eight years

Making a preferential transfer to a creditor will not cause the debtor to be denied a discharge. The transfer will simply be set aside by the trustee in bankruptcy.

Question 2

• Under the Bankruptcy Code, taxes are nondischargeable if they were due within three years of the bankruptcy. Here, the taxes are from the prior year.
• Secured claims are discharged in bankruptcy because the secured creditor is given the collateral or the value of the collateral to the extent of the debt owed.

Question 3

The goal of a reorganization is to allow the debtor’s business to continue; the business is not dissolved at the conclusion of the bankruptcy proceedings.

Question 4

Robin Corp. incurred substantial operating losses for the past three years. Unable to meet its current obligations, Robin filed a petition for reorganization under Chapter 11 of the federal Bankruptcy Code. Which of the following statements is correct?

A.	The creditors' committee must select a trustee to manage Robin's affairs.

B.	The reorganization plan may only be filed by Robin.

C.	A creditors' committee, if appointed, will consist of unsecured creditors.

D.	Robin may continue in business only with the approval of a trustee.

Answer 4

Explanation

Choice “C” is correct. The creditors’ committee, if appointed, is made up of unsecured creditors.

Choice “A” is incorrect. A trustee usually is not appointed in a reorganization.

Choice “B” is incorrect. Robin has a right to file the first plan of reorganization, but creditors can also file a plan.

Choice “D” is incorrect. In a reorganization there is a presumption that the debtor will remain in possession.

Question 5

A reorganization under Chapter 11 of the federal Bankruptcy Code requires all of the following, except the:

A.	Liquidation of the debtor.

B.	The filing of a reorganization plan.

C.	Confirmation of the reorganization plan by the court.

D.	Opportunity for each class of claims to accept the reorganization plan.

Answer 5

Choice “A” is correct. There is no requirement of liquidation in a reorganization.

Choice “B” is incorrect. In a reorganization a plan of reorganization must be filed.

Choice “C” is incorrect. In a reorganization the plan of reorganization must be approved by the court.

Choice “D” is incorrect. In a reorganization each class of claimants has an opportunity to accept the plan (although it need not be accepted by all classes, such as unimpaired classes of security holders).

Question 6

• A debt incurred through a fraud on a specific creditor, e.g., by making a false representation to the creditor, is a non-dischargeable debt.
• The unsecured portion of collateralized debt is dischargeable.
• Claims for unintentional torts are dischargeable. Debts arising from intentional torts are not dischargeable.
• A claim arising out of a breach of contract is dischargeable.

Question 7

A foreign entity may file a proceeding under what chapter?

Answer 7

A foreign entity can file an ancillary proceeding under chapter 15 and may file a proceeding under chapter 7 or chapter 11.

Question 8

1. Secured Claimant
2. Priority Claimant

Answer 8

Priority Claimant:

• Child Support obligation & Alimony
• Administrative expense (Court, trustee, legal and accounting fee, filing fee)
• Ordinary Course of business
• Wages earned up to $15,150
• Sum owed for employee benefits left after $15,150
• Farmers up to $7000
• Consumer deposit up to $3,350
• Tax Claims
• Personal injury claims from intoxication driving

Question 9

You can discriminate foreign government and tax claims governed by treaty

You cannot discriminate foreign creditors