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Bankruptcy Basics

Description: This quiz covers the basics of bankruptcy, including the different types of bankruptcy, the process of filing for bankruptcy, and the effects of bankruptcy.
Number of Questions: 15
Created by:
Tags: bankruptcy law finance
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What is the purpose of bankruptcy?

  1. To help debtors repay their debts

  2. To allow debtors to discharge their debts

  3. To punish debtors for their financial mismanagement

  4. To protect creditors from losing money

Show answer
Correct Option: B
Explanation:

Bankruptcy is a legal proceeding that allows debtors to discharge their debts and start over financially.

What are the different types of bankruptcy?

  1. Chapter 7

  2. Chapter 11

  3. Chapter 13

  4. All of the above

Show answer
Correct Option: D
Explanation:

There are three main types of bankruptcy: Chapter 7, Chapter 11, and Chapter 13. Chapter 7 is for individuals and businesses who cannot repay their debts and want to liquidate their assets to pay creditors. Chapter 11 is for businesses that want to reorganize their debts and continue operating. Chapter 13 is for individuals who want to repay their debts over time through a court-approved plan.

Who can file for bankruptcy?

  1. Individuals

  2. Businesses

  3. Both individuals and businesses

  4. None of the above

Show answer
Correct Option: C
Explanation:

Both individuals and businesses can file for bankruptcy. Individuals can file under Chapter 7, Chapter 11, or Chapter 13. Businesses can file under Chapter 11 or Chapter 13.

What is the process of filing for bankruptcy?

  1. File a petition with the bankruptcy court

  2. Attend a meeting of creditors

  3. Receive a discharge of debts

  4. All of the above

Show answer
Correct Option: D
Explanation:

The process of filing for bankruptcy involves filing a petition with the bankruptcy court, attending a meeting of creditors, and receiving a discharge of debts.

What are the effects of bankruptcy?

  1. Loss of property

  2. Damage to credit score

  3. Difficulty obtaining credit in the future

  4. All of the above

Show answer
Correct Option: D
Explanation:

Bankruptcy can have a number of negative effects, including loss of property, damage to credit score, and difficulty obtaining credit in the future.

What is a Chapter 7 bankruptcy?

  1. A liquidation bankruptcy

  2. A reorganization bankruptcy

  3. A plan bankruptcy

  4. None of the above

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Correct Option: A
Explanation:

Chapter 7 bankruptcy is a liquidation bankruptcy, which means that the debtor's assets are sold to pay creditors.

What is a Chapter 11 bankruptcy?

  1. A liquidation bankruptcy

  2. A reorganization bankruptcy

  3. A plan bankruptcy

  4. None of the above

Show answer
Correct Option: B
Explanation:

Chapter 11 bankruptcy is a reorganization bankruptcy, which means that the debtor is allowed to continue operating while reorganizing its debts.

What is a Chapter 13 bankruptcy?

  1. A liquidation bankruptcy

  2. A reorganization bankruptcy

  3. A plan bankruptcy

  4. None of the above

Show answer
Correct Option: C
Explanation:

Chapter 13 bankruptcy is a plan bankruptcy, which means that the debtor is allowed to repay their debts over time through a court-approved plan.

What is a discharge of debts?

  1. A court order that releases the debtor from their debts

  2. A court order that allows the debtor to continue operating their business

  3. A court order that allows the debtor to repay their debts over time

  4. None of the above

Show answer
Correct Option: A
Explanation:

A discharge of debts is a court order that releases the debtor from their debts.

What is the difference between a secured debt and an unsecured debt?

  1. A secured debt is backed by collateral, while an unsecured debt is not

  2. A secured debt has a higher interest rate than an unsecured debt

  3. A secured debt is easier to discharge in bankruptcy than an unsecured debt

  4. None of the above

Show answer
Correct Option: A
Explanation:

A secured debt is backed by collateral, which means that the creditor can seize the collateral if the debtor defaults on the loan. An unsecured debt is not backed by collateral.

What is a reaffirmation agreement?

  1. An agreement between the debtor and a creditor to repay a debt that was discharged in bankruptcy

  2. An agreement between the debtor and a creditor to modify the terms of a debt

  3. An agreement between the debtor and a creditor to extend the time to repay a debt

  4. None of the above

Show answer
Correct Option: A
Explanation:

A reaffirmation agreement is an agreement between the debtor and a creditor to repay a debt that was discharged in bankruptcy.

What is a co-debtor?

  1. A person who is jointly liable for a debt with another person

  2. A person who is liable for a debt that was discharged in bankruptcy

  3. A person who is liable for a debt that was reaffirmed in bankruptcy

  4. None of the above

Show answer
Correct Option: A
Explanation:

A co-debtor is a person who is jointly liable for a debt with another person.

What is a guarantor?

  1. A person who promises to pay a debt if the primary debtor defaults

  2. A person who is jointly liable for a debt with another person

  3. A person who is liable for a debt that was discharged in bankruptcy

  4. None of the above

Show answer
Correct Option: A
Explanation:

A guarantor is a person who promises to pay a debt if the primary debtor defaults.

What is a lien?

  1. A legal claim against property that secures a debt

  2. A court order that allows a creditor to seize property

  3. A document that transfers ownership of property

  4. None of the above

Show answer
Correct Option: A
Explanation:

A lien is a legal claim against property that secures a debt.

What is a foreclosure?

  1. The process of selling property to satisfy a debt

  2. The process of seizing property to satisfy a debt

  3. The process of transferring ownership of property to a creditor

  4. None of the above

Show answer
Correct Option: A
Explanation:

A foreclosure is the process of selling property to satisfy a debt.

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