INSOLVENCY LAW Exam Questions with Complete Solutions

INSOLVENCY LAW Exam Questions with Complete Solutions Explain the meaning of "insolvency"? - Correct Answers: The test is whether the debtor's liabilities exceed his assets. Explain the purpose of a sequestration order. - Correct Answers: It's a formal declaration that a debtor is insolvent. Explain the meaning of estate? - Correct Answers: A collection of assets and liabilities, but a debtor who only has liabilities may be regarded as having one. Explain the meaning of debtor? - Correct Answers: Is a person/partnership or their estate, who owes money. State the basic difference between voluntary surrender and compulsory sequestration. - Correct Answers: Voluntary surrender refers to when the debtor himself applies for the sequestration of his estate. Compulsory sequestration refers to when a creditor applies for the sequestration of the debtor's estate. Explain whether one of the partners may apply for the sequestration of a partnership estate. - Correct Answers: Section 3(2) Insolvency Act states that all partners (x en commandite) must apply for the sequestration of partnership estate. Explain whether one of the spouses may apply for sequestration of the joint estate of persons married in community of property. - Correct Answers: Section 17(4) Matrimonial Property Act 88 of 1984, both spouses must apply for the surrender of their joint estate. Describe what the court must be convinced prior to granting the order for the voluntary sequestration of a person's estate. - Correct Answers: Section 6(1) Insolvency Act the court must satisfy * All prescribed formalities are met *Estate is insolvent *Sufficient realisable property in free residue to defray all cost of sequestration *It will be to the advantage of the creditors What is the free residue of an insolvent estate? - Correct Answers: Is part of the estate which is not subject to any right of preference by reason of a special mortgage, legal hypothec, pledge or right of retenion. T/F A debtor who has no assets and only liabilities cannot surrender their estate. - Correct Answers: T. A logical result of the requirement that the debtor must own sufficient property to meet the costs of the sequestration is that a debtor who has no assets and only liabilities cannot surrender their estate.