AIC 301 UPDATED EXAMS GUIDE STUDY QUESTIONS
AND ANSWERS SURE A+
✔✔the body of federal law that allows debtors who are unable to pay their creditors to
divide their assets among their creditors to discharge their debts - ✔✔bankruptcy law
✔✔2 avenues for consumers to relieve themselves of debt - ✔✔1) personal liquidation
2) reorganization
✔✔liquidation of debtor's assets and distribution to creditors - ✔✔personal liquidation
✔✔reorganization of debtor's affairs and partial or full repayment of debts -
✔✔reorganization
✔✔insurers are unique in that they are not subject to ______________ bankruptcy
laws, but are governed by ___________ laws if they become insolvent. - ✔✔federal;
state
✔✔the 3 chapters of Bankruptcy Act most relevant to consumers - ✔✔7, 11, 13
,✔✔the bankrupt entity's nonexempt assets are distributed to its various creditors, and
the balance of the debtor's obligations are forgiven and discharged (last resort) -
✔✔chapter 7
✔✔creates opportunities to allow struggling businesses to restructure finances and
obligations so their debts can be paid off to lenders over time - ✔✔chapter 11
✔✔permits consumers to set up a plan for paying a portion or all of the creditors without
the threat of creditors' lawsuits - ✔✔chapter 13
✔✔creditor may force the debtor into bankruptcy if they are not receiving payments from
the debtor but believe they have assets - ✔✔involuntary bankruptcy
✔✔5 parties to a federal bankruptcy proceeding - ✔✔1) debtor
2) creditors
3) trustee
4) bankruptcy judge
5) attorneys for the debtor, creditor, or trustee
✔✔a person who inventories the bankrupt person's assets and either conserves them or
disposes of them economically - ✔✔trustee
✔✔_____________ debtors are usually the 1st group paid in Chapter 7 liquidation
proceedings, because their payment is guaranteed by a ______________ interest -
✔✔security; security
✔✔an interest in property that allows the property to be sold on default to satisfy the
debt for which it was given - ✔✔security interest
✔✔2nd group paid in Chapter 7 liquidation proceedings - ✔✔those entitled to receive
unsecured money from the debtor
✔✔___________________ & ______________________ are ineligible for discharge in
liquidation because the organization will not continue in business and thus has no need
for a fresh start - ✔✔corporations; partnerships
✔✔in reorganization, ___________ ________________ of the bankruptcy plan
discharges the debtor - ✔✔full performance
✔✔6 debts that bankruptcy does NOT discharge - ✔✔1) certain tax claims
2) money, property, or services obtained by fraud
3) claims for willful and malicious injury to people or property
4) alimony or support
, 5) most education loans
6) debts occurred in court actions arising from drunk driving
✔✔the failure to exercise the degree of care that a responsible person in a similar
situation would exercise to avoid harming others - ✔✔negligence
✔✔a wrongful act or omission, other than a crime or a breach of contract, that invades a
legally protected right - ✔✔torts
✔✔a person or an organization that has committed a tort - ✔✔tortfeasor
✔✔2 aspects of negligence claims - ✔✔1) elements of negligence
2) required proof of negligence
✔✔4 elements of negligence - ✔✔1) legal duty
2) breach of duty
3) proximate cause
4) actual injury or damage
✔✔a standard for the degree of care exercised in a situation that is measure by what a
reasonably cautious person would or would not do under similar circumstances -
✔✔reasonable person test
✔✔an element of negligence that exists when parties are in such a relationship that the
law imposes on one party the responsibility for the exercise of care toward the other
party - ✔✔legal duty
✔✔failure to conform to the standard of care required in the situation - ✔✔breach of
duty
✔✔airlines, railroads, or trucking companies that furnish transportation to a member of
the public seeking their offered service - ✔✔common carriers
✔✔a cause that in a natural and continuous sequence unbroken by any new and
independent cause, produces an event and without which the event would not have
happened - ✔✔proximate cause
✔✔a rule used to determine whether a defendant's act was the primary cause of a
plaintiff's harm based on the determination that the plaintiff's harm could not have
occurred but for the defendant's act - ✔✔"but for" rule
✔✔a rule used to determine proximate cause of a loss by determining which of the acts
are significant factors in causing the harm - ✔✔substantial factor rule
AND ANSWERS SURE A+
✔✔the body of federal law that allows debtors who are unable to pay their creditors to
divide their assets among their creditors to discharge their debts - ✔✔bankruptcy law
✔✔2 avenues for consumers to relieve themselves of debt - ✔✔1) personal liquidation
2) reorganization
✔✔liquidation of debtor's assets and distribution to creditors - ✔✔personal liquidation
✔✔reorganization of debtor's affairs and partial or full repayment of debts -
✔✔reorganization
✔✔insurers are unique in that they are not subject to ______________ bankruptcy
laws, but are governed by ___________ laws if they become insolvent. - ✔✔federal;
state
✔✔the 3 chapters of Bankruptcy Act most relevant to consumers - ✔✔7, 11, 13
,✔✔the bankrupt entity's nonexempt assets are distributed to its various creditors, and
the balance of the debtor's obligations are forgiven and discharged (last resort) -
✔✔chapter 7
✔✔creates opportunities to allow struggling businesses to restructure finances and
obligations so their debts can be paid off to lenders over time - ✔✔chapter 11
✔✔permits consumers to set up a plan for paying a portion or all of the creditors without
the threat of creditors' lawsuits - ✔✔chapter 13
✔✔creditor may force the debtor into bankruptcy if they are not receiving payments from
the debtor but believe they have assets - ✔✔involuntary bankruptcy
✔✔5 parties to a federal bankruptcy proceeding - ✔✔1) debtor
2) creditors
3) trustee
4) bankruptcy judge
5) attorneys for the debtor, creditor, or trustee
✔✔a person who inventories the bankrupt person's assets and either conserves them or
disposes of them economically - ✔✔trustee
✔✔_____________ debtors are usually the 1st group paid in Chapter 7 liquidation
proceedings, because their payment is guaranteed by a ______________ interest -
✔✔security; security
✔✔an interest in property that allows the property to be sold on default to satisfy the
debt for which it was given - ✔✔security interest
✔✔2nd group paid in Chapter 7 liquidation proceedings - ✔✔those entitled to receive
unsecured money from the debtor
✔✔___________________ & ______________________ are ineligible for discharge in
liquidation because the organization will not continue in business and thus has no need
for a fresh start - ✔✔corporations; partnerships
✔✔in reorganization, ___________ ________________ of the bankruptcy plan
discharges the debtor - ✔✔full performance
✔✔6 debts that bankruptcy does NOT discharge - ✔✔1) certain tax claims
2) money, property, or services obtained by fraud
3) claims for willful and malicious injury to people or property
4) alimony or support
, 5) most education loans
6) debts occurred in court actions arising from drunk driving
✔✔the failure to exercise the degree of care that a responsible person in a similar
situation would exercise to avoid harming others - ✔✔negligence
✔✔a wrongful act or omission, other than a crime or a breach of contract, that invades a
legally protected right - ✔✔torts
✔✔a person or an organization that has committed a tort - ✔✔tortfeasor
✔✔2 aspects of negligence claims - ✔✔1) elements of negligence
2) required proof of negligence
✔✔4 elements of negligence - ✔✔1) legal duty
2) breach of duty
3) proximate cause
4) actual injury or damage
✔✔a standard for the degree of care exercised in a situation that is measure by what a
reasonably cautious person would or would not do under similar circumstances -
✔✔reasonable person test
✔✔an element of negligence that exists when parties are in such a relationship that the
law imposes on one party the responsibility for the exercise of care toward the other
party - ✔✔legal duty
✔✔failure to conform to the standard of care required in the situation - ✔✔breach of
duty
✔✔airlines, railroads, or trucking companies that furnish transportation to a member of
the public seeking their offered service - ✔✔common carriers
✔✔a cause that in a natural and continuous sequence unbroken by any new and
independent cause, produces an event and without which the event would not have
happened - ✔✔proximate cause
✔✔a rule used to determine whether a defendant's act was the primary cause of a
plaintiff's harm based on the determination that the plaintiff's harm could not have
occurred but for the defendant's act - ✔✔"but for" rule
✔✔a rule used to determine proximate cause of a loss by determining which of the acts
are significant factors in causing the harm - ✔✔substantial factor rule
