256
petition was filed and therefore get the lowest priority as
general creditors.
G. Discharge of a Bankrupt
20. (b) This is an intentional tort and the liability for
these injuries would not be discharged in bankruptcy; how-
ever, this does not bar a general discharge of the debts. An-
swer (a) is incorrect because this is one of the prime acts
that the law attempts to prevent. Answer (c) is incorrect
because failing to satisfactorily explain a loss of assets can
bar a general discharge. Answer (d) is incorrect because this
is an act that can bar a general discharge.
21. (d) Corporations and partnerships cannot receive a
discharge under Chapter 7 of the Federal Bankruptcy Code.
Answer (a) is incorrect because although preferential trans-
fers' can be set aside, this would not prevent the discharge in
bankruptcy. Answer (b) is incorrect because the rule is that
destroying information relevant to the bankruptcy proceed-
ing can bar a general discharge unless the act was justified
under the circumstances. The accidental nature of the act in
answer (b) is not a good case to bar the discharge. An-
swer (c) is incorrect because the rule states that the dis-
charge is not allowed if the debtor has been discharged in
bankruptcy within the past six years rather than ten years.
22. (c) Actions that bar a general discharge in bank-
ruptcy include removing or destroying property within
twelve months prior to filing the petition with an intent to
hinder, delay, or defraud a creditor. Also included is mak-
ing a false entry in a document related to the bankrupt's
affairs. Obtaining credit by fraud involving the debtor's
financial condition causes that debt to be nondischargeable.
It, however, does not prevent a general discharge of all
debts.
23. (b) The bankruptcy court can revoke the debtor's
discharge if the debtor committed fraud during the bank-
ruptcy proceedings, refused to obey lawful court orders, or
failed to answer correctly material questions on the bank-
ruptcy petition. Failure to list a creditor causes 'that credi-
tor's debt not to be discharged but does not cause a revoca-
tion of the discharge.
H. Debts Not Discharged by Bankruptcy
24. (c) There is a list of various types of debts that will
not be discharged in bankruptcy, even though a general dis-
charge is allowed. Among these are liabilities from theft,
embezzlement, and committing fraud about one's financial
condition. Note that liabilities from ordinary negligence or
from breaches of contract, whether intentional or not, are
dischargeable in bankruptcy.
25. (a) Debts that are not discharged in bankruptcy in-
clude alimony, separate maintenance, and child support. A
claim from a breach of contract is a typical type of claim
discharged. Any amount unsatisfied after sale of the collat-
eral is paid along with the rest of the general creditors if
sufficient funds remain after all of the other creditors are
paid. These are discharged in bankruptcy. Although inten-
tional torts are not dischargable in bankruptcy, claims based
on mere negligence are.
J. Reaffirmation
26. (d) To get debtors to reaffirm debts that have been
discharged in bankruptcy, creditors must comply with cer-
MODULE 27 BANKRUPTCY
tain procedures. In general, the reaffirmation must take
place before the discharge is granted and it must be ap-
proved by the bankruptcy court. The debtor is given sixty
days to rescind the reaffirmation after s/he agrees to it. An-
swer (a) is incorrect because it must be agreed to before
discharge. Answer (b) is incorrect because there is no such
limitation on the dollar amounts. Answer (c) is incorrect
because the reaffirmation agreement is valid for almost all
debt including household purpose debt.
K. Business Reorganization-Chapter 11
27. (d) Under the reorganization provisions of Chap-
ter 11 of the Federal Bankruptcy Code, a court supervised
rehabilitation plan is adopted. It typically allows for the
continued operation of the business and provides for the
payment of all or part of the debts over an extended period
of time. The payments to the creditors often come largely
from future earnings. Answer (a) is incorrect because the
court typically does not discharge the debtor from all of its
debts under a Chapter 11 bankruptcy but provides for pay-
ments of debts out of future earnings. Answer (b) is incor-
rect because the plans can apply to any creditors whether
they were in the portion that agreed to the plan or not. An-
swer (c) is incorrect because the debtor under Chapter 11 is
often required to pay all or part of the debts out of future
earnings.
28. (d) The Chapter 11 bankruptcy petition may either
be filed voluntarily by the debtor or filed by the reditors to
force the debtor into bankruptcy. Answer (a) is jncorrect
because a trustee need not be appointed. Answer (b) is in-
correct because the debtor need not be insolvent to file a
voluntary bankruptcy petition. Answer (c) is incorrect be-.
cause only the debtor has the right to file the reorganization
plan during the first 120 days the order for relief occurs.
29. (d) Under Chapter 11 of the Federal Bankruptcy
Code, individuals, partnerships, and corporations are eligible
for reorganization. Savings and loan companies, banks, and
insurance companies are not eligible.
L. Debts Adjustment Plans-Chapter 13
30. (a) It is a false statement and therefore the correct
answer to be chosen because under a Chapter l3
bankruptcy-Debts Adjustment Plan-in general
individuals need to have regular income along with other
specified requirements. Answers (b) and (c) are not correct
because they are both accurate statements for a Chapter l3
bankruptcy. Answer (d) is incorrect because response (a) is
an accurate statement.
13. The Bankruptcy Abuse Prevention and
Consumer
Protection Act of 2005
31. (d) Under the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005, all three of the listed
types of debts are nondischargeable in bankruptcy. Note
that this act causes bankruptcy law to be much less friendly
to debtors over previous law. Also note that Statement I is
still true even if the situation caused injury rather than death.