The Comprehensive U.S. Bankruptcy Law Exam:
Essential Questions, Answers, and Rationales
, Chapter 7: Liquidation
# Question 1
A debtor files a voluntary petition under Chapter 7. Which of the following is **not** required for the petition to be valid?
A) The debtor must have debts exceeding the value of assets.
B) The debtor must be eligible for bankruptcy relief.
C) The debtor must complete credit counseling within 180 days before filing.
D) The debtor must file a petition, schedules, and a statement of financial affairs.
**Answer: A**
**Rationale:** A Chapter 7 voluntary petition does **not** require the debtor to show that liabilities exceed the fair market value of assets.
Debtors often file because of cash flow problems even when they are solvent on a balance sheet basis. The other options are statutory
requirements for a valid voluntary petition.
,---
# Question 2
Which of the following debts is **not** dischargeable in a Chapter 7 bankruptcy?
A) Credit card debt incurred for luxury goods.
B) A student loan.
C) Medical bills.
D) Personal loans from family members.
**Answer: B**
**Rationale:** Student loans are generally non-dischargeable in bankruptcy unless the debtor can prove "undue hardship," which is a very
difficult standard to meet. Credit card debt (even for luxury goods, though potentially subject to a non-dischargeability complaint), medical bills,
and personal loans are typically dischargeable absent fraud or other specific exceptions.
---
# Question 3
Under Chapter 7, a trustee is appointed to:
, A) Negotiate a repayment plan with creditors.
B) Liquidate the debtor's non-exempt assets and distribute proceeds to creditors.
C) Convert the case to Chapter 13.
D) Represent the debtor in all court proceedings.
**Answer: B**
**Rationale:** The primary role of the Chapter 7 trustee is to collect and sell the debtor's non-exempt assets and distribute the proceeds to
creditors according to the priority scheme established by the Bankruptcy Code. The trustee does not negotiate repayment plans (that is
Chapter 13 or 11) and does not represent the debtor.
---
# Question 4
The "means test" under § 707(b) of the Bankruptcy Code is designed to:
A) Ensure that debtors with sufficient income repay at least a portion of their unsecured debts.
B) Determine the priority of creditor claims.
C) Calculate the amount of exemptions a debtor may claim.
D) Determine whether a debtor's debts are primarily consumer debts.
Essential Questions, Answers, and Rationales
, Chapter 7: Liquidation
# Question 1
A debtor files a voluntary petition under Chapter 7. Which of the following is **not** required for the petition to be valid?
A) The debtor must have debts exceeding the value of assets.
B) The debtor must be eligible for bankruptcy relief.
C) The debtor must complete credit counseling within 180 days before filing.
D) The debtor must file a petition, schedules, and a statement of financial affairs.
**Answer: A**
**Rationale:** A Chapter 7 voluntary petition does **not** require the debtor to show that liabilities exceed the fair market value of assets.
Debtors often file because of cash flow problems even when they are solvent on a balance sheet basis. The other options are statutory
requirements for a valid voluntary petition.
,---
# Question 2
Which of the following debts is **not** dischargeable in a Chapter 7 bankruptcy?
A) Credit card debt incurred for luxury goods.
B) A student loan.
C) Medical bills.
D) Personal loans from family members.
**Answer: B**
**Rationale:** Student loans are generally non-dischargeable in bankruptcy unless the debtor can prove "undue hardship," which is a very
difficult standard to meet. Credit card debt (even for luxury goods, though potentially subject to a non-dischargeability complaint), medical bills,
and personal loans are typically dischargeable absent fraud or other specific exceptions.
---
# Question 3
Under Chapter 7, a trustee is appointed to:
, A) Negotiate a repayment plan with creditors.
B) Liquidate the debtor's non-exempt assets and distribute proceeds to creditors.
C) Convert the case to Chapter 13.
D) Represent the debtor in all court proceedings.
**Answer: B**
**Rationale:** The primary role of the Chapter 7 trustee is to collect and sell the debtor's non-exempt assets and distribute the proceeds to
creditors according to the priority scheme established by the Bankruptcy Code. The trustee does not negotiate repayment plans (that is
Chapter 13 or 11) and does not represent the debtor.
---
# Question 4
The "means test" under § 707(b) of the Bankruptcy Code is designed to:
A) Ensure that debtors with sufficient income repay at least a portion of their unsecured debts.
B) Determine the priority of creditor claims.
C) Calculate the amount of exemptions a debtor may claim.
D) Determine whether a debtor's debts are primarily consumer debts.
