Essentials of Business Law 8th Edition Liuzzo – Test Bank

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Sample Questions Posted Below

 

 

 

 

 

 

True / False Questions

  1. The United States Constitution forms the basis for all American Law.
    True    False

 

  1. There are three types of constitutional powers.
    True    False

 

  1. Express powers are those that are specifically stated in a statute.
    True    False

 

  1. The process of a court deciding whether a law is contrary to the constitution is known as judicial review.
    True    False

 

  1. Each amendment of the federal constitution needs to be ratified by the legislatures of half of the 50 states.
    True    False

 

  1. Since its inception, the federal Constitution of the United States has never been amended nor changed.
    True    False

 

  1. The Commerce Clause creates one of the most fundamental powers of the Constitution.
    True    False

 

 

  1. It is constitutionally acceptable for a municipality to pass a law limiting what a journalist could write or say about a political candidate or issue.
    True    False

 

  1. The right to bear arms is unlimited.
    True    False

 

  1. Under the Fourth Amendment police officers and other government officials (but not private citizens) must have probable cause to be able to conduct a personal or property search.
    True    False

 

  1. If Owen refused to testify on the premise that the information he would divulge would self-incriminate him, he can legally do so under the Fifth Amendment protection.
    True    False

 

  1. The Eight Amendment mandates that people accused or convicted of crimes are subject to excessive bail.
    True    False

 

  1. The Eight Amendment prevents the Government from imposing an unjustly harsh fine on a person convicted of a crime.
    True    False

 

  1. The Fourteenth Amendment applies to actions of the federal government.
    True    False

 

 

  1. The Fourteenth Amendment provides that when states pass laws they must treat all individuals equally.
    True    False

 

  1. The strict scrutiny test is a standard that measures whether the legislature had a compelling interest for enacting a particular statute
    True    False

 

  1. The Sixteenth Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    True    False

 

  1. The Sixteenth Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    True    False

 

  1. The IRS does not improve taxpayers’ understanding of tax laws.
    True    False

 

 

Multiple Choice Questions

  1. In the United States, how many types of powers do the federal Constitution and state constitutions confer on the government?
    A. Eight
    B. Six
    C. Four
    D. Two

 

 

  1. Each constitutional amendment must be proposed by a:
    A. one-third vote of Congress.
    B. one-fourth vote of Congress.
    C. two-thirds vote of Congress.
    D. three-fourths vote of Congress.

 

  1. The Constitution is divided and subdivided in all of the following EXCEPT:
    A. articles.
    B. sections.
    C. clauses.
    D. papers.

 

  1. The following are clauses of the Constitution who have a specific impact on businesses EXCEPT:
    A. Commerce Clause.
    B. Full Faith and Credit Clause.
    C. Supremacy Clause
    D. Competitive Clause

 

  1. “According to the supremacy clause, a Supreme Court ruling that involves a constitutional issue is binding on state courts.” This statement is part of which Clause or Article:
    A. Article 1, Section 8, Clause 3.
    B. Article IV, Section 1.
    C. Article IV, Section 2.
    D. Article V, Section 1.

 

  1. Freedom of Speech is covered under which Amendment:
    A. First Amendment.
    B. Second Amendment.
    C. Fourth Amendment.
    D. Sixteenth Amendment.

 

 

  1. All the following speeches may be limited or silenced under the First Amendment EXCEPT:
    A. speech that incites imminent danger.
    B. political or religious speech.
    C. child pornography.
    D. speech that is defamatory.

 

  1. The right to bear arms is protected under the ________________Amendment:
    A. First.
    B. Second.
    C. Eight.
    D. Sixteenth.

 

  1. Examples of unreasonable searches and seizures include the following EXCEPT:
    A. a detention of longer than 48 hours after a criminal arrest.
    B. a nonconsensual extraction of blood.
    C. the gathering of fingerprint evidence in certain circumstances.
    D. the stop of motorists at sobriety checkpoints to investigate possible instances of driving under the influence.

 

  1. The Fifth Amendment required that all persons be granted procedural and _____________ due process:
    A. reflective.
    B. substantive.
    C. criminal.
    D. questionable.

 

 

  1. Under the _________________Amendment the following are examples of punishments which are prohibited: a person convicted of armed robbery is sentenced to death; a person convicted of shoplifting is sentenced to life in prison; a minor is sentenced to life in prison for stealing a car; a person convicted of assault and battery is sentenced to death.
    A. First.
    B. Fourth.
    C. Eight.
    D. Sixteenth.

 

  1. The Eight Amendment does the following EXCEPT:
    A. restricts both the severity and the types of punishments that may be imposed by federal and state governments..
    B. mandates that people accused or convicted of crimes are not to be subject to excessive bail..
    C. allows for barbarous punishment.
    D. prevents the government from imposing an unjustly harsh fine on a person convicted of a crime.

 

  1. Under the Fourteenth Amendment, laws that do not treat all people equally are unconstitutional unless the state can show that the law passes the following tests EXCEPT:
    A. the effect on a person’s conscience test.
    B. rational basis test.
    C. intermediate scrutiny test.
    D. strict scrutiny test.

 

  1. The _______________test is a standard that measures whether a particular statute is substantially related to an important government objective:
    A. peer pressure test.
    B. rational basis test.
    C. intermediate scrutiny test.
    D. strict scrutiny test.

 

 

  1. The ______________ Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    A. Fourth
    B. Eight
    C. Fourteenth
    D. Sixteenth

 

  1. The ___________________ is a federal agency established by Congress and tasked with administering and collecting federal income tax:
    A. FDA.
    B. IRS.
    C. FDIC.
    D. SEC.

 

 

Short Answer Questions

  1. Identify and describe the process of deciding if a law is contrary to the Constitution.

 

 

 

 

  1. Describe the Doctrine of Preemption.

 

 

 

 

 

  1. Discuss the Free Speech part of the First Amendment and what types of speeches may be limited or silenced.

 

 

 

 

  1. Provide examples searches and seizures considered to be unreasonable under the Fourth Amendment.

 

 

 

 

  1. What power did the Sixteenth Amendment grant the federal government?

 

 

 

 

 

 

 

 

 

 

 

 

True / False Questions

  1. (p. 74)The United States Constitution forms the basis for all American Law.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74)There are three types of constitutional powers.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74)Express powers are those that are specifically stated in a statute.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74)The process of a court deciding whether a law is contrary to the constitution is known as judicial review.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

 

 

  1. (p. 74)Each amendment of the federal constitution needs to be ratified by the legislatures of half of the 50 states.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74)Since its inception, the federal Constitution of the United States has never been amended nor changed.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 75)The Commerce Clause creates one of the most fundamental powers of the Constitution.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.2 Discuss the main provisions of the commerce clause, the full faith and credit clause, and the supremacy clause.

  1. (p. 77)It is constitutionally acceptable for a municipality to pass a law limiting what a journalist could write or say about a political candidate or issue.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.3 Describe three provisions of the First Amendment.

  1. (p. 78)The right to bear arms is unlimited.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.4 Discuss the current state of constitutional law with respect to the Second Amendment.

 

 

  1. (p. 79)Under the Fourth Amendment police officers and other government officials (but not private citizens) must have probable cause to be able to conduct a personal or property search.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.5 Describe the requirement of probable cause under the Fourth Amendment.

  1. (p. 80)If Owen refused to testify on the premise that the information he would divulge would self-incriminate him, he can legally do so under the Fifth Amendment protection.
    TRUE

 

Bloom’s: Analysis
Bloom’s: Comprehension
Learning Outcomes: 5.6 Identify and explain four protections provided by the Fifth Amendment.

  1. (p. 81)The Eight Amendment mandates that people accused or convicted of crimes are subject to excessive bail.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.7 Provide examples of cases that are addressed by the Eighth Amendment.

  1. (p. 81)The Eight Amendment prevents the Government from imposing an unjustly harsh fine on a person convicted of a crime.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.7 Provide examples of cases that are addressed by the Eighth Amendment.

  1. (p. 82)The Fourteenth Amendment applies to actions of the federal government.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.8 Explain the due process and equal protection clauses of the Fourteenth Amendment.

 

 

  1. (p. 82)The Fourteenth Amendment provides that when states pass laws they must treat all individuals equally.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.8 Explain the due process and equal protection clauses of the Fourteenth Amendment.

  1. (p. 82)The strict scrutiny test is a standard that measures whether the legislature had a compelling interest for enacting a particular statute
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.8 Explain the due process and equal protection clauses of the Fourteenth Amendment.

  1. (p. 83)The Sixteenth Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

  1. (p. 83)The Sixteenth Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

  1. (p. 83)The IRS does not improve taxpayers’ understanding of tax laws.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

 

 

 

Multiple Choice Questions

  1. (p. 74)In the United States, how many types of powers do the federal Constitution and state constitutions confer on the government?
    A. Eight
    B. Six
    C. Four
    D. Two

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74)Each constitutional amendment must be proposed by a:
    A. one-third vote of Congress.
    B. one-fourth vote of Congress.
    C. two-thirds vote of Congress.
    D. three-fourths vote of Congress.

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 75)The Constitution is divided and subdivided in all of the following EXCEPT:
    A. articles.
    B. sections.
    C. clauses.
    D. papers.

 

Bloom’s: Knowledge
Learning Outcomes: 5.2 Discuss the main provisions of the commerce clause, the full faith and credit clause, and the supremacy clause.

 

 

  1. (p. 75)The following are clauses of the Constitution who have a specific impact on businesses EXCEPT:
    A. Commerce Clause.
    B. Full Faith and Credit Clause.
    C. Supremacy Clause
    D. Competitive Clause

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 75)“According to the supremacy clause, a Supreme Court ruling that involves a constitutional issue is binding on state courts.” This statement is part of which Clause or Article:
    A. Article 1, Section 8, Clause 3.
    B. Article IV, Section 1.
    C. Article IV, Section 2.
    D. Article V, Section 1.

 

Bloom’s: Knowledge
Learning Outcomes: 5.2 Discuss the main provisions of the commerce clause, the full faith and credit clause, and the supremacy clause.

  1. (p. 77)Freedom of Speech is covered under which Amendment:
    A. First Amendment.
    B. Second Amendment.
    C. Fourth Amendment.
    D. Sixteenth Amendment.

 

Bloom’s: Knowledge
Learning Outcomes: 5.3 Describe three provisions of the First Amendment.

 

 

  1. (p. 77)All the following speeches may be limited or silenced under the First Amendment EXCEPT:
    A. speech that incites imminent danger.
    B. political or religious speech.
    C. child pornography.
    D. speech that is defamatory.

 

Bloom’s: Knowledge
Learning Outcomes: 5.3 Describe three provisions of the First Amendment.

  1. (p. 78)The right to bear arms is protected under the ________________Amendment:
    A. First.
    B. Second.
    C. Eight.
    D. Sixteenth.

 

Bloom’s: Knowledge
Learning Outcomes: 5.3 Describe three provisions of the First Amendment.

  1. (p. 79)Examples of unreasonable searches and seizures include the following EXCEPT:
    A. a detention of longer than 48 hours after a criminal arrest.
    B. a nonconsensual extraction of blood.
    C. the gathering of fingerprint evidence in certain circumstances.
    D. the stop of motorists at sobriety checkpoints to investigate possible instances of driving under the influence.

 

Bloom’s: Knowledge
Learning Outcomes: 5.4 Discuss the current state of constitutional law with respect to the Second Amendment.

 

 

  1. (p. 80)The Fifth Amendment required that all persons be granted procedural and _____________ due process:
    A. reflective.
    B. substantive.
    C. criminal.
    D. questionable.

 

Bloom’s: Knowledge
Learning Outcomes: 5.6 Identify and explain four protections provided by the Fifth Amendment.

  1. (p. 81)Under the _________________Amendment the following are examples of punishments which are prohibited: a person convicted of armed robbery is sentenced to death; a person convicted of shoplifting is sentenced to life in prison; a minor is sentenced to life in prison for stealing a car; a person convicted of assault and battery is sentenced to death.
    A. First.
    B. Fourth.
    C. Eight.
    D. Sixteenth.

 

Bloom’s: Knowledge
Learning Outcomes: 5.7 Provide examples of cases that are addressed by the Eighth Amendment.

  1. (p. 80-81)The Eight Amendment does the following EXCEPT:
    A. restricts both the severity and the types of punishments that may be imposed by federal and state governments..
    B. mandates that people accused or convicted of crimes are not to be subject to excessive bail..
    C. allows for barbarous punishment.
    D. prevents the government from imposing an unjustly harsh fine on a person convicted of a crime.

 

Bloom’s: Knowledge
Learning Outcomes: 5.7 Provide examples of cases that are addressed by the Eighth Amendment.

 

 

  1. (p. 82)Under the Fourteenth Amendment, laws that do not treat all people equally are unconstitutional unless the state can show that the law passes the following tests EXCEPT:
    A. the effect on a person’s conscience test.
    B. rational basis test.
    C. intermediate scrutiny test.
    D. strict scrutiny test.

 

Bloom’s: Knowledge
Learning Outcomes: 5.8 Explain the due process and equal protection clauses of the Fourteenth Amendment.

  1. (p. 82)The _______________test is a standard that measures whether a particular statute is substantially related to an important government objective:
    A. peer pressure test.
    B. rational basis test.
    C. intermediate scrutiny test.
    D. strict scrutiny test.

 

Bloom’s: Knowledge
Learning Outcomes: 5.8 Explain the due process and equal protection clauses of the Fourteenth Amendment.

  1. (p. 83)The ______________ Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.
    A. Fourth
    B. Eight
    C. Fourteenth
    D. Sixteenth

 

Bloom’s: Knowledge
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

 

 

  1. (p. 83)The ___________________ is a federal agency established by Congress and tasked with administering and collecting federal income tax:
    A. FDA.
    B. IRS.
    C. FDIC.
    D. SEC.

 

Bloom’s: Application
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

 

Short Answer Questions

  1. (p. 74)Identify and describe the process of deciding if a law is contrary to the Constitution.

The process of deciding if a law is contrary to the Constitution is known as judicial review. Courts have the power to determine whether laws enacted by legislatures or decisions made by lower courts violate the provisions of the Constitution. If a court decides that a law is contrary to the constitution, the law can be declared unconstitutional, and, therefore, invalid.

 

Bloom’s: Application
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

  1. (p. 74-75)Describe the Doctrine of Preemption.

If a state or local law is inconsistent with the federal law, the state or local law may be declared unconstitutional, and the federal law must be followed. This is known as the doctrine of preemption—that is, the federal law preempts, or supersedes, the state law. This doctrine applies only in instances where the law in question pertains to a power that the Constitution has expressly or implicitly granted to Congress.

 

Bloom’s: Knowledge
Learning Outcomes: 5.1 Explain the difference between express and implied powers; describe the process used to amend the U.S. Constitution; and explain judicial review and the doctrine of preemption.

 

 

  1. (p. 77)Discuss the Free Speech part of the First Amendment and what types of speeches may be limited or silenced.

The First Amendment’s freedom of speech clause gives Americans a fundamental right.
Individuals have the right to freedom of political or religious speech, but this right should be guarded most zealously when the speech is unpopular, upsetting, ignorant, or even anger-provoking. As such, speech that is sexist, racist, ageist, or otherwise offensive is also protected.
The following are examples of speech that may constitutionally be limited or silenced: speech that incites imminent danger; child pornography; speech that is legally obscene; speech that threatens physical harm; speech that is defamatory, including both slander and libel; interference with works protected by trademark, patent, or copyright law

 

Bloom’s: Knowledge
Learning Outcomes: 5.3 Describe three provisions of the First Amendment.

  1. (p. 79)Provide examples searches and seizures considered to be unreasonable under the Fourth Amendment.

Examples of unreasonable searches and seizures include a detention of longer than 48 hours after a criminal arrest; a nonconsensual extraction of blood; and the gathering of fingerprint evidence in certain circumstances.

 

Bloom’s: Application
Learning Outcomes: 5.5 Describe the requirement of probable cause under the Fourth Amendment.

  1. (p. 83)What power did the Sixteenth Amendment grant the federal government?

The Sixteenth Amendment granted the federal government the power to impose and collect a tax on individuals’ incomes.

 

Bloom’s: Knowledge
Learning Outcomes: 5.9 Discuss how the Internal Revenue Service administers the collection of income taxes pursuant to the Sixteenth Amendment.

 

 

 

 

True / False Questions

  1. An individual or business that owes money is said to be a creditor.
    True    False

 

  1. Insolvency often leads to default.
    True    False

 

  1. Bankruptcy is the legal state that occurs when a debtor is insolvent, is in default, and is unable to fulfill his or her obligations to pay back his or her creditors.
    True    False

 

  1. Bankruptcy filings can be made for the sole purpose of defrauding creditors.
    True    False

 

  1. A voluntary filing occurs when the debtor himself or herself files a bankruptcy petition.
    True    False

 

  1. Bankruptcy law is divided in clauses.
    True    False

 

  1. The most common type of bankruptcy filed by individuals and businesses is Chapter 7.
    True    False
  2. Under Chapter 7 bankruptcy the trustee collects the debtor’s exempt property, sells it and dispenses the proceeds to the creditors in a fair manner.
    True    False

 

 

  1. A secured debt is a loan for which a specific asset is used as collateral, or pledged.
    True    False

 

  1. Two types of actions by the debtor are prohibited under bankruptcy law: preferential payment and fraudulent transfer.
    True    False

 

  1. A contract that is entered into by the debtor that includes a preferential payment is void.
    True    False

 

  1. Bankruptcy law provides that no debts survive the bankruptcy.
    True    False

 

  1. The means test uses a complex formula that measures an individual’s income relative to the median income of the people in the state where he or she resides.
    True    False

 

  1. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 does not allow the bankruptcy court to disallow a petition for a Chapter 7 bankruptcy if the individual filing for bankruptcy earns an income that is too high to meet the standards of the means test.
    True    False

 

  1. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that a debtor who wishes to file under any chapter of the bankruptcy law must, unless exempt, receive individual or group credit counseling from an approved, not-for-profit, individual or group budget or credit counseling agency by telephone or online.
    True    False

 

 

  1. Under the provisions of Chapter 13 of the federal bankruptcy law, the debtor retains his or her property, but agrees to pay back all or a portion of his or her debts on an interest free
    basis over a period spanning from three to five years.
    True    False

 

  1. Priority debts are deemed to be sufficiently important that they do not have to be paid in full.
    True    False

 

  1. The purpose of Chapter 9 is to provide a municipality with a debt repayment plan, rather than to require the liquidation of municipal assets.
    True    False

 

  1. Under Chapter 11 major decisions must be approved by management.
    True    False

 

  1. Chapter 15 provides a framework for bankruptcy cases in which foreign countries are involved.
    True    False

 

 

Multiple Choice Questions

  1. A debtor is an individual or business who:
    A. owes money.
    B. counts money.
    C. loans money
    D. likes money.

 

 

  1. Insolvency occurs when:
    A. assets equal liabilities.
    B. liabilities exceed assets.
    C. assets exceed liabilities.
    D. there are no assets.

 

  1. A(n) ______________ filing occurs when creditors pressure the debtor to file:
    A. involuntary.
    B. voluntary.
    C. free.
    D. concurrent.

 

  1. Under Chapter 7 of the bankruptcy law examples of exempt property under federal law include the following EXCEPT:
    A. one motor vehicle.
    B. appliances.
    C. trade tools.
    D. vacation home.

 

  1. Examples of debts discharged under Chapter 7 bankruptcy are the following EXCEPT:
    A. credit card bills
    B. medical bills.
    C. lawsuit judgments
    D. student loans.

 

  1. A record of bankruptcy may remain on one’s record for up to:
    A. 3 years.
    B. 5 years.
    C. 7 years.
    D. 10 years.

 

 

  1. In general a debtor may not file for Chapter 7 bankruptcy if he or she had received a bankruptcy discharge in the last_________________:
    A. one to three years.
    B. three to five years.
    C. six to eight years.
    D. eight to ten years.

 

  1. The Bankruptcy Abuse Prevention and Consumer Protection Act allows the bankruptcy court to disallow a petition for a Chapter 7 bankruptcy if the individual filing for bankruptcy earns an income that is __________________to meet the standards of the means test.
    A. too high.
    B. too low.
    C. equal.
    D. not existing.

 

  1. In addition to the means test, the Bankruptcy Abuse Prevention and Consumer Protection Act requires that a debtor who wishes to file under any chapter of the bankruptcy law must, unless exempt, receive individual or group credit counseling from an approved, not-for-profit, individual or group budget or credit counseling agency. The debtor must obtain a certificate from this agency outlining the assistance in budgeting that the debtor received. The counseling must be performed by telephone or online within _________ prior to the bankruptcy filing.
    A. 30 days.
    B. 90 days.
    C. 180 days.
    D. 360 days.

 

  1. Under the provisions of Chapter 13 of the federal bankruptcy law, the debtor retains his or her property but agrees to pay back all or a portion of his or her debts on an interest free basis over a period spanning from ____________ years.
    A. one to three.
    B. two to four.
    C. three to five.
    D. five to ten.

 

 

  1. Under Chapter 13, certain debts are considered to be priority debts. Priority debts are deemed to be _________________that they must be paid in full.
    A. necessary.
    B. sufficiently important.
    C. exempt.
    D. nonexempt.

 

  1. Under Chapter 13 examples of priority debts include all of the following EXCEPT:
    A. certain tax obligations.
    B. alimony and child support.
    C. wages owed to employees.
    D. automobile loans.

 

  1. Chapter 13 bankruptcy is sometimes referred to as a ______________________:
    A. reorganization bankruptcy.
    B. realignment bankruptcy.
    C. recharging bankruptcy.
    D. revision bankruptcy.

 

  1. Under Chapter 9 bankruptcy municipality is defined as the following type of entity EXCEPT:
    A. a political subdivision
    B. a public agency
    C. an instrumentality of a state
    D. a private agency

 

  1. Chapter 11 Bankruptcy is mostly used by_____________:
    A. partnerships.
    B. sole proprietorships.
    C. individuals.
    D. corporations.

 

 

  1. To be eligible for a Chapter 12 bankruptcy, a debtor cannot owe more than_____________:
    A. $1,000,000.
    B. $1,500,000.
    C. $1,750,000.
    D. $2,000,000.

 

  1. To be eligible for a Chapter 12 bankruptcy, at least ____________of the debtor’s income must come from his or her farming or fishing activities.
    A. 100 %.
    B. 80%.
    C. 50%.
    D. 25%.

 

  1. The purpose of Chapter 15 bankruptcy is to promote _______________between U.S. courts and those of foreign countries in bankruptcy cases.
    A. collaboration.
    B. competition.
    C. creativity.
    D. cooperation.

 

 

Short Answer Questions

  1. Identify and define the two types of bankruptcy filings.

 

 

 

 

 

  1. Define and give examples of secured debts.

 

 

 

 

  1. Define and give examples of secured debts.

 

 

 

 

  1. Discuss the two types of actions that are prohibited under Chapter 7 of the bankruptcy law.

 

 

 

 

 

 

 

 

 

 

True / False Questions

  1. (p. 338)An individual or business that owes money is said to be a creditor.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

  1. (p. 338)Insolvency often leads to default.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

  1. (p. 338)Bankruptcy is the legal state that occurs when a debtor is insolvent, is in default, and is unable to fulfill his or her obligations to pay back his or her creditors.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

  1. (p. 338)Bankruptcy filings can be made for the sole purpose of defrauding creditors.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

 

 

  1. (p. 338)A voluntary filing occurs when the debtor himself or herself files a bankruptcy petition.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.2 Distinguish between a voluntary fi ling and an involuntary fi ling in bankruptcy.

  1. (p. 338)Bankruptcy law is divided in clauses.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.2 Distinguish between a voluntary fi ling and an involuntary fi ling in bankruptcy.

  1. (p. 338)The most common type of bankruptcy filed by individuals and businesses is Chapter 7.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.2 Distinguish between a voluntary fi ling and an involuntary fi ling in bankruptcy.

  1. (p. 339)Under Chapter 7 bankruptcy the trustee collects the debtor’s exempt property, sells it and dispenses the proceeds to the creditors in a fair manner.
    FALSE

 

Bloom’s: Comprehension
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 339)A secured debt is a loan for which a specific asset is used as collateral, or pledged.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

 

 

  1. (p. 339)Two types of actions by the debtor are prohibited under bankruptcy law: preferential payment and fraudulent transfer.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 339)A contract that is entered into by the debtor that includes a preferential payment is void.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 340)Bankruptcy law provides that no debts survive the bankruptcy.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 341)The means test uses a complex formula that measures an individual’s income relative to the median income of the people in the state where he or she resides.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

  1. (p. 341)The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 does not allow the bankruptcy court to disallow a petition for a Chapter 7 bankruptcy if the individual filing for bankruptcy earns an income that is too high to meet the standards of the means test.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

 

 

  1. (p. 342)The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that a debtor who wishes to file under any chapter of the bankruptcy law must, unless exempt, receive individual or group credit counseling from an approved, not-for-profit, individual or group budget or credit counseling agency by telephone or online.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

  1. (p. 342)Under the provisions of Chapter 13 of the federal bankruptcy law, the debtor retains his or her property, but agrees to pay back all or a portion of his or her debts on an interest free
    basis over a period spanning from three to five years.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

  1. (p. 342)Priority debts are deemed to be sufficiently important that they do not have to be paid in full.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

  1. (p. 343)The purpose of Chapter 9 is to provide a municipality with a debt repayment plan, rather than to require the liquidation of municipal assets.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

 

 

  1. (p. 343)Under Chapter 11 major decisions must be approved by management.
    FALSE

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

  1. (p. 345)Chapter 15 provides a framework for bankruptcy cases in which foreign countries are involved.
    TRUE

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

 

Multiple Choice Questions

  1. (p. 338)A debtor is an individual or business who:
    A. owes money.
    B. counts money.
    C. loans money
    D. likes money.

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

  1. (p. 338)Insolvency occurs when:
    A. assets equal liabilities.
    B. liabilities exceed assets.
    C. assets exceed liabilities.
    D. there are no assets.

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

 

 

  1. (p. 338)A(n) ______________ filing occurs when creditors pressure the debtor to file:
    A. involuntary.
    B. voluntary.
    C. free.
    D. concurrent.

 

Bloom’s: Knowledge
Learning Outcomes: 21.2 Distinguish between a voluntary fi ling and an involuntary fi ling in bankruptcy.

  1. (p. 339)Under Chapter 7 of the bankruptcy law examples of exempt property under federal law include the following EXCEPT:
    A. one motor vehicle.
    B. appliances.
    C. trade tools.
    D. vacation home.

 

Bloom’s: Comprehension
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 340)Examples of debts discharged under Chapter 7 bankruptcy are the following EXCEPT:
    A. credit card bills
    B. medical bills.
    C. lawsuit judgments
    D. student loans.

 

Bloom’s: Comprehension
Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 340)A record of bankruptcy may remain on one’s record for up to:
    A. 3 years.
    B. 5 years.
    C. 7 years.
    D. 10 years.

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

 

 

  1. (p. 340)In general a debtor may not file for Chapter 7 bankruptcy if he or she had received a bankruptcy discharge in the last_________________:
    A. one to three years.
    B. three to five years.
    C. six to eight years.
    D. eight to ten years.

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 341)The Bankruptcy Abuse Prevention and Consumer Protection Act allows the bankruptcy court to disallow a petition for a Chapter 7 bankruptcy if the individual filing for bankruptcy earns an income that is __________________to meet the standards of the means test.
    A. too high.
    B. too low.
    C. equal.
    D. not existing.

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

  1. (p. 342)In addition to the means test, the Bankruptcy Abuse Prevention and Consumer Protection Act requires that a debtor who wishes to file under any chapter of the bankruptcy law must, unless exempt, receive individual or group credit counseling from an approved, not-for-profit, individual or group budget or credit counseling agency. The debtor must obtain a certificate from this agency outlining the assistance in budgeting that the debtor received. The counseling must be performed by telephone or online within _________ prior to the bankruptcy filing.
    A. 30 days.
    B. 90 days.
    C. 180 days.
    D. 360 days.

 

Bloom’s: Knowledge
Learning Outcomes: 21.4 Describe the means test and the requirement for debtor education and credit counseling under the Bankruptcy Abuse Prevention and Consumer Protection Act.

 

 

  1. (p. 342)Under the provisions of Chapter 13 of the federal bankruptcy law, the debtor retains his or her property but agrees to pay back all or a portion of his or her debts on an interest free basis over a period spanning from ____________ years.
    A. one to three.
    B. two to four.
    C. three to five.
    D. five to ten.

 

Bloom’s: Knowledge
Learning Outcomes: 21.5 Explain the provisions and applications of Chapter 13 of the federal bankruptcy law.

  1. (p. 342)Under Chapter 13, certain debts are considered to be priority debts. Priority debts are deemed to be _________________that they must be paid in full.
    A. necessary.
    B. sufficiently important.
    C. exempt.
    D. nonexempt.

 

Bloom’s: Knowledge
Learning Outcomes: 21.5 Explain the provisions and applications of Chapter 13 of the federal bankruptcy law.

  1. (p. 342)Under Chapter 13 examples of priority debts include all of the following EXCEPT:
    A. certain tax obligations.
    B. alimony and child support.
    C. wages owed to employees.
    D. automobile loans.

 

Bloom’s: Knowledge
Learning Outcomes: 21.5 Explain the provisions and applications of Chapter 13 of the federal bankruptcy law.

 

 

  1. (p. 342)Chapter 13 bankruptcy is sometimes referred to as a ______________________:
    A. reorganization bankruptcy.
    B. realignment bankruptcy.
    C. recharging bankruptcy.
    D. revision bankruptcy.

 

Bloom’s: Knowledge
Learning Outcomes: 21.5 Explain the provisions and applications of Chapter 13 of the federal bankruptcy law.

  1. (p. 343)Under Chapter 9 bankruptcy municipality is defined as the following type of entity EXCEPT:
    A. a political subdivision
    B. a public agency
    C. an instrumentality of a state
    D. a private agency

 

Bloom’s: Comprehension
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

  1. (p. 343)Chapter 11 Bankruptcy is mostly used by_____________:
    A. partnerships.
    B. sole proprietorships.
    C. individuals.
    D. corporations.

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

  1. (p. 344)To be eligible for a Chapter 12 bankruptcy, a debtor cannot owe more than_____________:
    A. $1,000,000.
    B. $1,500,000.
    C. $1,750,000.
    D. $2,000,000.

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

 

 

  1. (p. 344)To be eligible for a Chapter 12 bankruptcy, at least ____________of the debtor’s income must come from his or her farming or fishing activities.
    A. 100 %.
    B. 80%.
    C. 50%.
    D. 25%.

 

Bloom’s: Knowledge
Learning Outcomes: 21.6 Explain the major applications of Chapters 9, 11, 12, and 15 of the federal bankruptcy law.

  1. (p. 345)The purpose of Chapter 15 bankruptcy is to promote _______________between U.S. courts and those of foreign countries in bankruptcy cases.
    A. collaboration.
    B. competition.
    C. creativity.
    D. cooperation.

 

Bloom’s: Knowledge
Learning Outcomes: 21.5 Explain the provisions and applications of Chapter 13 of the federal bankruptcy law.

 

Short Answer Questions

  1. (p. 358)Identify and define the two types of bankruptcy filings.

Bankruptcy flings can either be voluntary or involuntary. A voluntary fling occurs when the debtor himself or herself files a bankruptcy petition; an involuntary fling occurs when creditors pressure the debtor to file.

 

Bloom’s: Knowledge
Learning Outcomes: 21.1 Explain the conditions under which individuals and businesses become insolvent and default on their loans.

 

 

  1. (p. 339)Define and give examples of secured debts.

A secured debt is a loan for which a specific asset is used as collateral, or pledged. Examples of secured loans are mortgages, which are secured by the real property (the land and the home), and automobile loans, which are frequently secured by the vehicles that have been purchased.

 

Bloom’s: Knowledge/Comprehension
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 339)Define and give examples of secured debts.

A secured debt is a loan for which a specific asset is used as collateral, or pledged. Examples of secured loans are mortgages, which are secured by the real property
(the land and the home), and automobile loans, which are frequently secured by the vehicles
that have been purchased.

 

Bloom’s: Knowledge/Comprehension
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

  1. (p. 339)Discuss the two types of actions that are prohibited under Chapter 7 of the bankruptcy law.

The two types of actions by the debtor that are prohibited under bankruptcy law are: preferential payment and fraudulent transfer. Preferential payment is the one in which the debtor gives favorable treatment to one creditor over another, and fraudulent transfer, is the one in which the debtor sells property for an amount far below its market value, thus depriving creditors of the fair value had the property been liquidated by the trustee. A contract that is entered into by the debtor that includes either a preferential payment or a fraudulent transfer is illegal and, therefore is void.

 

Bloom’s: Knowledge
Learning Outcomes: 21.3 Explain the provisions and applications of Chapter 7 of the federal bankruptcy law.

 

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