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Chap 08_9e_Standard Indicate whether the statement is true or false. 1. Ahmi was a witness in a lawsuit. When asked why he fired Rana, Ahmi replied, "Rana was fired for willful misconduct." Indeed, Rana had not engaged in any misconduct. Rana will be able to successfully sue Ahmi for defamation based on what Ahmi said in court. a. True b. False 2. Public officials can win a defamation case only by proving the defendant's actual malice. a. True b. False 3. A witness testifying in a court or legislature may never be sued for defamation. a. True b. False 4. Working out some frustrations after a bad game, Jessica angrily hits a baseball and then sees it is flying toward the umpire. She yells, “Watch out!” The umpire ducks and the ball misses him. Since there was no physical contact, no assault or battery occurred. a. True b. False 5. The First Amendment guarantee of freedom of speech is an absolute right. a. True b. False 6. In an advertisement, FreshAir, Inc. stated that its air freshener lasted for 3 hours while the competitor's Smell Sweet lasted for only 36 minutes. In fact, Smell Sweet freshens the air for more than 2 hours. FreshAir has not violated the Lanham Act because the First Amendment's guarantee of freedom of speech applies. a. True b. False 7. Lori works for Big Corporation. The existing contract between Lori and Big Corporation can be terminated at will by either party. Richard, the owner of a small store, offers to pay Lori much more money if she will leave Big Corporation and work for his store. When Lori starts to work for Richard, Big Corporation correctly claims Richard is liable for tortious interference with a contract. a. True b. False 8. Dewayne sold a space heater to Vivian, telling her it would heat a 200-square-foot area, even though he knew it would effectively heat only about one-third of that space. Dewayne is liable for the intentional tort of fraud. a. True b. False

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Chap 08_9e_Standard 9. The single recovery principle requires a court to settle a matter once and for all by awarding a lump sum for past and future expenses. a. True b. False 10. There are four elements to a defamation case, and the plaintiff in any kind of lawsuit must prove one of the four elements to prevail. a. True b. False 11. Punitive damages are intended to punish the defendant for conduct that is extreme and outrageous. a. True b. False 12. A tort is a violation of a duty imposed by the civil law. a. True b. False 13. A salesclerk at Braybon's Department Store observed a customer remove a ring from a display case and put it in her purse. In most states, Braybon's will be able to detain the customer for suspicion of shoplifting. a. True b. False 14. If Gloria threw a rock that hit Merle, she is liable for an intentional tort of battery only if she intended to injure or harm Merle. a. True b. False 15. In order for a plaintiff to win a case involving intentional infliction of emotional distress, she must prove the defendant acted in an extreme and outrageous manner. a. True b. False Indicate the answer choice that best completes the statement or answers the question. 16. Adam decided to play a practical joke on Linda, a coworker. As Linda was leaving the office one night, Adam, wearing a mask, stepped out from behind some bushes. He pointed a handgun made out of licorice at her and demanded her purse. He then pushed the candy gun to her head and told her if she told anybody he'd kill her. Linda was very scared during the whole incident. She did not think it was funny when Adam pulled the mask off and took a bite out of the gun as he gave her the purse back. Did Adam commit the tort of intentional infliction of emotional distress? a. Yes, as his conduct was intentional. b. Yes, but only if Adam intended to cause Linda serious emotional distress. c. No, since he was only playing a practical joke. d. No, since Linda was not physically hurt by Adam.

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Chap 08_9e_Standard 17. Which of the following guarantees that a witness testifying in a court or legislature may never be sued for defamation? a. recovery principle b. protected right to slander c. defamation privilege d. absolute privilege 18. Which of the following statements is correct regarding the differences between contract, tort, and criminal law? a. Tort and criminal law both impose a punishment for the defendant including prison and/or a fine. b. Criminal law imposes duties of conduct on all persons. c. Contract law awards money damages for the plaintiff; tort and criminal law do not. d. Criminal law is prosecuted by the government. 19. Shortly after Brian started to work at Trevit, Inc., a coworker, Ann, began asking him out. Brian said no. Nevertheless, Ann persisted. One day Ann playfully but intentionally touched Brian “below the belt.” Which statement is correct? a. Ann defamed Brian. b. Ann committed the tort of trespass. c. Ann committed the tort of interference with a prospective advantage. d. Ann committed the tort of battery. 20. Soledad tells Marco that she believes he was cheating on a biology exam and calls him a "cheater" to his face. She did not tell anyone else about her suspicions. Marco did not, in fact, cheat on the exam. Has defamation occurred? a. No, because no one else received the defamatory message besides Marco. b. No, because Soledad did not put her accusation in writing. c. Yes, because Soledad's accusation was false. d. Yes, because Marco's feelings were hurt. 21. Which of the following is the general goal of compensatory damages? a. to find a way to help the defendant avoid jail time for his or her crime b. to restore the plaintiff to the position he or she was in before the injury c. to punish the defendant for extreme and outrageous conduct d. to make the defendant suffer as much as the plaintiff suffered 22. Taking or using someone's personal property without consent is referred to as a. fraud. b. negligence. c. conversion. d. trespassing.

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Chap 08_9e_Standard 23. The idea behind punitive damages is that a. torts that occur in a commercial setting are far more serious than torts affecting private individuals. b. certain behavior is so unacceptable that society must make an example of it. c. the right to free speech is not absolute and must sometimes be restricted. d. the defendant must be restored to the position he/she was in before the injury. 24. Wholesome Bread, Inc. advertised that its honey wheat bread had 25% fewer calories than a competing brand, Valley Grains. In fact, Wholesome's bread had the same amount of calories as Valley Grains' bread. Wholesome Bread's conduct a. does not violate the Lanham Act because of the First Amendment freedom of speech. b. does not violate the Lanham Act because Wholesome did not act with actual malice. c. does not violate the Lanham Act because comparative ads are exempt from the law. d. violates the Lanham Act. 25. Adam decided to play a practical joke on Linda, a coworker. As Linda was leaving the office one night, Adam, wearing a mask, stepped out from behind some bushes. He pointed a handgun made out of licorice at her and demanded her purse. He then pushed the candy gun to her head and told her if she told anybody he'd kill her. Linda was very scared during the whole incident. She did not think it was funny when Adam pulled the mask off and took a bite out of the gun as he gave her the purse back. Which statement is correct? a. Adam committed an assault but not a battery. b. Adam committed a battery but not an assault. c. Adam committed an assault and a battery. d. Adam committed neither an assault nor a battery since he used a candy gun and was only playing a joke on Linda. 26. The ruling in the landmark case of New York Times v. Sullivan was that a public official can win a defamation case a. without proving the defendant acted with reckless disregard of the truth. b. only by proving the defendant's actual malice. c. without proving the defendant knew his or her statement was false. d. only by proving the defendant has a history of reckless behavior. 27. In awarding punitive damages, a court considers all of the following EXCEPT a. the difference between the punitive award and any civil penalties used in similar cases. b. the ratio between the harm suffered and the award. c. the financial condition of the plaintiff. d. the reprehensibility of the defendant's conduct.

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Chap 08_9e_Standard 28. Jim told his manager, Lana, that a coworker, Diane, had been in prison for theft. Lana checked into the matter, and when she learned that Diane had served time in prison for theft, she fired her. a. Jim is liable to Diane for defamation. b. Jim is liable to Diane for defamation unless he can show a legitimate reason for having to tell Lana about Diane's prison history. c. Jim is liable to Diane for defamation only if she is a public figure. d. Jim is not liable to Diane for defamation. 29. Tipton Company makes a deal with Patton Company to purchase 100 canvas tarps. Patton's competitor, QC Industries, tells Tipton Company executives that Patton's goods are shoddy and Tipton cancels the contract with Patton. What will likely occur? a. Patton will sue Tipton for defamation. b. QC Industries will sue Patton for intentional infliction of emotional distress. c. Patton will sue QC Industries for tortious interference with a contract. d. Tipton will sue Patton for tortious interference with a prospective advantage. 30. An intentional tort involves conduct in which a. the defendant intended to harm the plaintiff. b. the defendant intended a certain physical act that ends up injuring someone. c. injuries are caused to someone because of the defendant’s neglect or oversight. d. there is resulting punishment, including prison, for the defendant. 31. Runyon was ready to sign a two-year agreement with Barnett Corp. to become Barnett’s sales representative for a three-state area. LaPrise, who wants to be the representative for that area, threatens Runyon with bodily harm if he takes the position. Runyon decides his physical well-being is more important to him than the job, so he does not accept the position. LaPrise a. committed tortious interference with a contract. b. committed tortious interference with a prospective advantage. c. committed a battery. d. caused a breach of contract and committed the tort of intrusion. 32. The elements in a defamation case are: a. defamatory statement; falsity; communication; and injury. b. a contract; knowledge of the contract; improper inducement; injury. c. false or misleading fact statements; statements in commercial advertising; likelihood of harm. d. duty; breach of duty; proximate causation; and damages. 33. Don was standing in a cafeteria line holding a plate. Tim was upset with Don. Tim turned Don around and grabbed the plate out of Don's hand. Tim then held the plate up and threatened to break it over Don's head. Tim has committed a. a battery, but not an assault. b. an assault, but not a battery. c. both an assault and a battery. d. neither an assault nor a battery. Copyright Cengage Learning. Powered by Cognero.

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Chap 08_9e_Standard 34. John was driving home one night in a terrible snow storm when his car stalled. He managed to push the car onto a small shopping center's parking lot. The next day about noon he came to get the car and it had been towed away by the owner of the parking lot. The owner explained she had to remove the car to clean the snow off her lot and told John where the car had been towed. Which statement is correct? a. The owner of the parking lot is liable for conversion. She took John's car without his consent. b. The parking lot owner has absolute privilege for towing the car since it was a business necessity. c. Even though John left his car in the parking lot under emergency conditions, he still committed a trespass on the owner's property. d. All these are correct. 35. A national magazine published an article about a famous television star. The television personality is upset because the information contained in the story is not correct. If the actress sues the magazine, a. she will need to show that the magazine has a history of being "reckless" with facts on a regular basis. b. she will need to show that the magazine either knew the story was false or acted with reckless disregard of the facts. c. she will need to show that the magazine failed to attempt to verify the story by trying to contact her or her agent before the story was printed. d. she will need to show that the magazine could have discovered that the story was false but failed to do so. 36. Edith becomes ill at work, but her boss insists that she finish mopping the shop floor and cleaning the cabinets before she is allowed to leave. He physically prevents her from leaving the premises by watching over her until her work is finished. What tort has occurred? a. trespass b. conversion c. battery d. false imprisonment 37. Trein, Inc. entered into a one-year, $1 million contract with Mia, a sports celebrity, to promote Trein's products. E-presto Inc., a competitor of Trein, was interested in having Mia promote its products but knew of her contract with Trein. E-presto offered Mia a three-year, $5 million contract. Mia left Trein and signed with E-presto. If Trein sues E-presto for tortious interference with a contract, E-presto a. will be able to establish a justification since E-presto was acting to protect an existing economic interest. b. will be able to establish a justification because, in talking to Mia, E-presto was exercising its First Amendment freedom of speech. c. will be able to establish a justification because to decide otherwise would subject Mia to involuntary servitude. d. will not be able to establish a justification.

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Chap 08_9e_Standard 38. Rodney was employed by Deluxe Discount Store. Rodney's manager directed him to check the prices of dog food at Huge Savings Store. The manager of Huge Savings Store saw Rodney writing down prices and asked him to leave. Rodney, fearful that he would be fired by Deluxe, refused to leave. Rodney committed the tort of a. larceny. b. trespass. c. misrepresentation. d. conversion. 39. Written defamation is _____; oral defamation is _______. a. fraud; conversion b. conversion; fraud c. slander; libel d. libel; slander 40. Which of the following statements about torts is correct? a. A tortious act is always a criminal act. b. A criminal act is always a tortious act. c. A tortious act may also be a criminal act. d. A tortious act is the same as a contract dispute. 41. On its website, Otrex, Inc. claimed that its pain reliever was more effective than Nelton, a competing pain reliever. Discuss the elements that Nelton must prove to win a case against Otrex under the Lanham Act.

42. Tracy is an employee of Zebra Toy Company, and both parties are free to terminate her employment at will. One afternoon she has lunch with a friend who works in marketing for her company's biggest competitor, Tiger Toys. Over a period of about three months, Tiger Toy representatives convince Tracy to work with them. Tiger offers a larger base salary with bigger commissions than she had with Zebra. When Tracy leaves Zebra, the company sues Tiger Toys claiming it intentionally interfered with a contractual relationship. Will Zebra Toy Company be successful?

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Chap 08_9e_Standard 43. As assistant manager of a discount department store, you have been asked to review the store's policy concerning shoplifters. (a) Discuss the legal standard used in most states governing the detention of suspected shoplifters. (b) In reviewing the store's policy, discuss some of the items that you will consider.

44. Discuss the four elements that must be proven in order to win a defamation case.

45. Wilma’s arm is broken when Paula knocks her down during an argument. If Wilma sues Paula for battery, what damages is Wilma likely to receive?

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Chap 08_9e_Standard Answer Key 1. False 2. True 3. True 4. False 5. False 6. False 7. False 8. True 9. True 10. False 11. True 12. True 13. True 14. False 15. True 16. a 17. d 18. d 19. d 20. a 21. b 22. c 23. b 24. d 25. c 26. b

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Chap 08_9e_Standard 27. c 28. d 29. c 30. b 31. b 32. a 33. c 34. c 35. b 36. d 37. d 38. b 39. d 40. c 41. Nelton must prove that: (a) Otrex made false or misleading fact statements about Nelton's product; (b) Otrex used the statements in commercial advertising or promotion; and (c) the statements created the likelihood of harm to Nelton. 42. No. The existing contract could be terminated at will by either party, meaning that although Zebra Toy Company had a contract with Tracy, Zebra Toy had no long-term assurances because both Tracy and Zebra Toy could end the contract "at will" at any time. 43. a)

Generally, a store may detain a customer for alleged shoplifting provided there is a reasonable basis for the suspicion and the detention is done reasonably.

Some of the items that should be considered include: what is a "reasonable" suspicion of shoplifting; what is "reasonable" detention; how private should the detention be; how can bias and prejudice be avoided; and how much questioning should the store do.

44. Defamatory statement. This is a factual statement that is likely to harm another person’s reputation. Because opinions are not factual, they do not generally count as defamatory statements. Falsity. The statement must be false. Making a true statement, no matter how mean, is not defamation. Communicated. The statement must be communicated to at least one person other than the plaintiff. Injury. The plaintiff must show some injury.

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Chap 08_9e_Standard 45. A successful plaintiff usually receives compensatory damages, which are supposed to place the plaintiff in the position she was in before the defendant’s conduct caused injury. Wilma can receive money for medical expenses she proves by producing bills from her medical providers. If a doctor testifies that she will need future treatment, she may also be awarded the expected cost. Under the single recovery principle, the court awards a lump sum for past and future expenses, and any unexpected expenses that arise in the future cannot be recovered. Paula is liable for Wilma’s lost wages caused by the battery. Also, Wilma may receive payment for pain and suffering. Punitive damages, intended to punish the defendant for conduct that is extreme and outrageous, are awarded in relatively few cases.

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Chap 09_9e_Standard Indicate whether the statement is true or false. 1. Most states recognize some form of comparative negligence. a. True b. False 2. The duty of care that each of us must follow is to behave as a reasonable person. a. True b. False 3. Tort issues are firmly ingrained in law and do not change. a. True b. False 4. A defendant engaging in an ultrahazardous activity is almost always liable for any harm that results. a. True b. False 5. In a strict liability case, the defendant is only liable if the product is defective when it leaves his hands. a. True b. False 6. A sports fan, injured by a hockey puck that flew into the stands during an NHL game, would be subject to the defense of assumption of the risk in a suit to recover for her injuries. a. True b. False 7. The doctrine of contributory negligence is followed in most states. a. True b. False 8. In strict liability, the injured person need not prove that the defendant’s conduct was unreasonable. a. True b. False 9. While hunting, Roger enters Adele’s property without permission and is injured by falling into a ditch that was obscured by the underbrush. Under the common law, Adele is liable for Roger’s injuries. a. True b. False 10. Kenneth was exposed to radiation on his job in an environmental cleanup. In a lawsuit against his employer, the court must decide the full extent of both present and future damages rather than allowing Kenneth to return to court years later if medical problems develop at that time. a. True b. False

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Chap 09_9e_Standard 11. Res ipsa loquitur shifts the burden of proof from the plaintiff to the defendant. a. True b. False 12. A defendant set off fireworks at a fully licensed Fourth of July show. The result of the activity caused harm to the plaintiff. In order for the plaintiff to win a case of negligence, he or she need only prove that it was foreseeable that the defendant's conduct might cause harm. a. True b. False 13. Palsgraf v. Long Island Railroad addressed the issue of furnishing alcohol to minors. a. True b. False 14. Silas asks his friend Shelby to come to his property to go fishing at his pond. If he fails to warn her that the pier has a rotten spot and she falls through and is injured, Silas would be held liable in most states. a. True b. False 15. A landowner's highest duty is owed to licensees. a. True b. False Indicate the answer choice that best completes the statement or answers the question. 16. One morning, Miles accidentally dropped a thumbtack on the chair of the office manager where he worked. The office manager sat on the tack and, two days later, was hospitalized with an infection caused by the tack. Which of the following is correct? a. Miles's actions were negligent. b. No tort has been committed. c. Miles committed an intentional tort. d. Miles is strictly liable. 17. Annette drove through an intersection without looking and hit Vincent's car that he had driven into the intersection without obeying a stop sign. Annette sued Vincent. The jury found that Annette’s fault contributed 20 percent to the collision and determined that her total loss was $100,000. Under comparative negligence, the jury should award Annette a. $20,000. b. $80,000. c. $100,000. d. nothing.

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Chap 09_9e_Standard 18. As it applies to landowners, which of the following statements regarding liability to a licensee is correct? a. Whether the landowner is responsible for injury depends on whether the licensee is an adult or a child. b. The landowner is liable to a licensee for injuries caused by hidden dangers only. c. Since the licensee is a trespasser on the landowner's property, the landowner is not responsible for injury. d. Since a licensee has permission to be on the landowner's property, the landowner is responsible for all injury whether hidden or obvious. 19. Kyle was eating clam chowder soup in a restaurant when a very small piece of bone lodged in his throat. Fortunately, he was able to remove the bone with his fingers. However, he was upset by the incident and sued the restaurant for negligence. What is the most likely result in this case? a. Kyle will not collect any damages since he did not sustain any harm. b. Kyle will collect damages because the restaurant committed negligence per se. c. Kyle will collect damages if he proves it was possible to prevent tiny fish bones from being present in clam chowder. d. Kyle will collect damages, as res ipsa loquitur applies. 20. Phillip was waiting for a bus at a bus stop. Across the street and down the block, a mechanic negligently overinflated a tire he was intending to put onto Marsha’s pickup truck. The exploding tire injured Marsha and frightened a neighborhood dog, which ran down the street and knocked Phillip down, injuring his knee. Phillip sued the mechanic. In applying the Palsgraf v. Long Island Railroad decision to this case, Phillip would a. win because the mechanic was negligent in overinflating the tire, which led to Phillip’s injury. b. win based on negligence per se. c. lose because the court would apply the doctrine of res ipsa loquitur. d. lose because, although the mechanic’s conduct was negligent toward Marsha, it was not a wrong in relation to Phillip, who was far away. The mechanic could not have foreseen injury to Phillip and therefore had no duty to him. 21. A plaintiff sues in negligence but has no proof of factual cause and foreseeable type of harm. Which of the following is most likely to help the plaintiff? a. res judicata b. stare decisis c. res ipsa loquitur d. mens rea 22. For the defendant to be liable in a negligence case, it must be proven that the defendant's conduct actually caused the injury. This is referred to as a. factual cause. b. duty of due care. c. proximate cause. d. breach.

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Chap 09_9e_Standard 23. Wayne worked in an office. He had no criminal record, had never had a complaint made against him about his work or his conduct, and had been a faithful employee for nearly 20 years. One day, Wayne followed his supervisor to his home and fatally shot him. The estate of the supervisor sued the company, claiming it should have been aware of Wayne's growing frustration with work. The company's best defense will be that a. there was no way to foresee that the incident would happen. b. the incident occurred away from the office. c. the killing was the result of a personal conflict between Wayne and the supervisor. d. even if the company had been aware of Wayne's difficulty with his supervisor, Wayne did not have any criminal history. 24. In a negligence case, the plaintiff must establish a. duty, strict liability, causation, and injury. b. mens rea, breach, foreseeable harm, and injury. c. duty, actus reus, foreseeable harm, and causation. d. duty of due care, breach, factual cause, proximate cause, and damages. 25. Anders suffered a shock when his electric radio dropped into the bathtub while he was taking a bath. Anders argued that he did not realize it was dangerous to operate an electric radio near his bathtub. If he sues the radio manufacturer for damages, which claim is he most likely to make? a. res ipsa loquitur b. negligent manufacture c. failure to warn d. negligent design 26. Tommie, a six-year-old child, was seriously injured when he stuck a fork into an electrical outlet at a restaurant. His parents sued the restaurant where the incident occurred, claiming it should have had child protective guards on the outlets even though no law required the restaurant to do so. Whether the restaurant is liable will be dependent upon whether a. the incident was reasonably foreseeable. b. the court views Tommie as a licensee or a trespassing child. c. this is negligence per se. d. this is an ultrahazardous activity. 27. Don was driving his truck when a board fell out of the truck bed and onto the road. Alice, who was driving closely behind Don's truck, tried to avoid the board, swerved, and struck a telephone pole, causing her severe injuries. Which of the following is correct? a. Don is strictly liable to Alice for her injuries. b. In a comparative negligence state, the actions of Don and Alice will be weighed to determine liability. c. Don was not negligent in allowing the board to fall out of his truck. d. Don is engaging in ultrahazardous activity.

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Chap 09_9e_Standard 28. Kelley went ice skating on a neighbor’s pond, but she fell through a thin area into icy waters. Kelley did not have permission to be on the property, and the neighbor did not even know that she was there. Is the neighbor liable for Kelley’s injuries? a. Yes. The neighbor should have posted “thin ice” notices. b. No. Kelley was a trespasser, and the neighbor can only be held liable for intentionally injuring her or for gross misconduct. c. It may depend on Kelley’s age. d. Yes, the neighbor is strictly liable. 29. Bob, a weak swimmer, ignored warning signs in a recreational swimming area and went into deep water. He soon grew tired and realized that he could not make it back to shore. Seeing Kelly, he cried out for help. Kelly, however, ignored the pleas. Bob was finally saved by Dorothy but suffered brain damage from being submerged during the ordeal. Bob now sues Kelly for negligence for failing to try to save him. Bob will a. prevail because society places a duty on people to help each other and Kelly breached this duty, resulting in Bob's injury. b. lose because Kelly had no legal duty to rescue him. c. lose even though Kelly had a legal duty to save him, since Bob will not be able to prove that Kelly's failure to act was the proximate cause of his injuries. d. lose because a reasonable person could not have foreseen that someone in a recreation area could not swim well. 30. Negligence concerns harm that a. is unforeseeable. b. arises intentionally. c. arises by accident. d. is always substantial. 31. A branch of tort law that imposes a much higher level of liability when harm results from ultrahazardous acts or defective products is referred to as a. res ipsa loquitur. b. strict liability. c. heightened liability. d. strict negligence. 32. Which of the following is true about res ipsa loquitur? a. It shifts the burden of proof from plaintiff to the defendant. b. The harm ordinarily would not occur without the defendant’s participation. c. The plaintiff had mostly a contributory role in causing the harm. d. The defendant did not have exclusive control of the thing that caused the harm.

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Chap 36_9e_Standard Indicate whether the statement is true or false. 1. Shoe Sunshine, Inc. filed for bankruptcy protection under Chapter 11 and submitted a plan of reorganization within 120 days after filing for relief. Two of the classes of creditors voted against the plan. However, the bankruptcy judge considered the plan to be feasible, fair, and in the best interests of the creditors; the judge approved it in spite of these creditors' objections. This action by the judge is called a "cramdown." a. True b. False 2. Bankruptcy is regulated by federal law. a. True b. False 3. Generally, filing bankruptcy stops the collection activity of creditors. a. True b. False 4. Peggy’s credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income, from sporadic freelance jobs, has dropped. Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets. a. True b. False 5. Brad was having financial difficulties and thought bankruptcy might be in his future. He transferred his sports car to his brother with the agreement that if he didn’t file for bankruptcy within the next 18 months, his brother would return the car to him. Brad did file for bankruptcy in 10 months. The bankruptcy trustee can void the transfer and bring the car back into Brad’s estate for the purpose of providing assets for Brad’s creditors. a. True b. False 6. Individual debtors are allowed to keep some assets in a Chapter 7 bankruptcy. a. True b. False 7. Under all chapters of the Bankruptcy Code, most of the debtor’s assets are distributed to creditors and the debtor has no obligation to share future earnings with creditors. a. True b. False 8. The Bankruptcy Code uses the term “debtor” to refer to a person who cannot pay his debts. a. True b. False 9. Chapter 7 bankruptcy petitions may only be filed voluntarily. a. True b. False Copyright Cengage Learning. Powered by Cognero.

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Chap 36_9e_Standard 10. Alimony and child support obligations are considered priority claims. a. True b. False 11. In a Chapter 13 bankruptcy, creditors cannot force a debtor into bankruptcy; nor can they vote to confirm or reject a plan of reorganization. a. True b. False 12. Creditor claims are divided into classes, and the highest class must be satisfied in full before going to the next category. a. True b. False 13. In Chapter 11 bankruptcy, only the debtor may propose plans of reorganization. a. True b. False 14. Francesca cannot serve as a trustee in a bankruptcy case because she is not a lawyer. a. True b. False 15. Chapters 11 and 13 are liquidation chapters. a. True b. False Indicate the answer choice that best completes the statement or answers the question. 16. What is the "gap period"? a. the period between the time a debtor files for bankruptcy and the time that he is granted discharge b. the period of time that creditors must wait to be paid once a plan of payment is approved c. the period between the time that a creditor files for an involuntary petition and the court issues the order for relief d. the period between the time a debtor files for bankruptcy and the time that the plan of payment is approved 17. Debts that cannot be discharged in bankruptcy include all EXCEPT a. money owed for alimony. b. income taxes for three years prior to filing. c. money owed to utility companies. d. money obtained fraudulently.

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Chap 36_9e_Standard 18. Chapter 7 bankruptcy is also known as a. reorganization. b. reaffirmation. c. voluntary bankruptcy. d. straight bankruptcy. 19. Which of the following statements concerning a Chapter 11 reorganization plan is TRUE? a. A reorganization plan will be confirmed by the court only if a majority of each class of creditors votes in favor of the plan. b. A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair. c. Only the bankruptcy court has the authority to confirm or reject the reorganization plan. Creditors do not have a right to vote on the plan. d. A reorganization plan binds only the debtor and not the creditors. 20. Ramona has received a discharge in bankruptcy but wants to reaffirm a debt to her sister. To be valid, the reaffirmation a. will be scrutinized by the court to make sure her sister has not unfairly pressured Ramona. b. will be automatically disallowed because allowing Ramona to promise to pay a discharged debt would be contrary to the goals of the bankruptcy proceedings. c. will be automatically allowed if Ramona voluntarily chooses to make it. d. must clearly disclose that Ramona has the right to rescind at any time since the debt was already discharged. 21. Under what circumstances might the court reject a debtor's Chapter 13 plan? a. The plan requires future earnings to pay off debts. b. The plan promises to pay all secured and priority claims. c. The plan anticipates paying the unsecured creditors less than what they would get under Chapter 7. d. The plan treats all unsecured classes equally. 22. A form stating the name of an unsecured creditor and the amount of the claim against the debtor is called a(n) a. order for relief. b. automatic stay. c. proof of claim. d. reaffirmation form. 23. Jun-seo owes $20,000 in unsecured claims to 15 different creditors, and he has generally not been paying debts that are due. Two of Jun-seo's creditors want to force him into bankruptcy by filing an involuntary petition; the other creditors do not agree. Which of the following statements is correct about this situation? a. An involuntary petition cannot be filed because Jun-seo is not that deeply in debt. b. An involuntary petition cannot be filed because not enough creditors want to force Jun-seo into bankruptcy. c. An involuntary petition can be filed because Jun-seo is not making his payments in a timely way. d. An involuntary petition can be filed because any one of Jun-seo's creditors can force him into bankruptcy. Copyright Cengage Learning. Powered by Cognero.

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Chap 36_9e_Standard 24. Grand Lighting Co. has filed a petition for voluntary bankruptcy under Chapter 7 of the Code. Which of the following will prohibit creditors from collecting debts that Grand Lighting incurred before the petition was filed? a. an automatic stay b. a proof of claim c. a voluntary petition d. a discharge statement 25. Agnes plans to file for bankruptcy under Chapter 7. One month prior to filing, Agnes gives Joe's Filling Station $700 to apply to her gas bill. Joe has been so kind to let her charge the gas she needed for her car over the past year. The bankruptcy trustee appointed to the case a. can cancel the payment to Joe as a fraudulent transfer. b. cannot cancel the payment to Joe because it is payment for an existing debt. c. cannot cancel the payment to Joe because he is not an insider. d. can cancel the payment to Joe as a voidable preference. 26. Who operates the business and develops a plan of reorganization in Chapter 11 bankruptcies? a. the trustee b. the debtor in possession c. the state courts d. the creditors' committee 27. Who is responsible for gathering the bankrupt's assets and dividing them among creditors? a. the executor b. the state court c. the creditors' committee d. the trustee 28. Iris received a discharge under a Chapter 7 bankruptcy. She cannot receive another discharge under Chapter 7 for at least a. six years after the prior filing. b. eight years after the prior filing. c. ten years after the prior discharge. d. She cannot file another Chapter 7, but could file a Chapter 11 or 13 bankruptcy. 29. Forever Yours, Inc. has a secured and perfected security interest in Sally's big-screen TV. On the filing date of Sally's Chapter 7 petition, the balance of the debt owed to Forever Yours is $2,000. The value of the TV is estimated at $1,500. This means that Forever Yours a. is secured for the entire debt, $2,000. b. is unsecured for $500, the excess of the debt over the value of the TV. c. has a high priority claim of $500. This means that Forever Yours, Inc. will be allowed $500 worth of other unsecured property before other unsecured creditors get anything. d. is unsecured for the entire debt.

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Chap 36_9e_Standard 30. Andy's business is not able to pay its debts, and the prospects for its finances to improve are slim. Andy decides not to continue the business. In this case, Andy should file a voluntary petition for which type of bankruptcy? a. Chapter 7. b. Chapter 11. c. Chapter 13. d. Chapter 12. 31. Link negligently ran his car into John, causing $50,000 in injuries. Link was intoxicated at the time of the accident. Can Link discharge this debt in bankruptcy? a. Yes, claims based on negligence are dischargeable. b. Yes, as long as he didn't intend to hit John's car. c. No, such claims are not dischargeable in bankruptcy. d. No, because Link breached a fiduciary duty. 32. When a debtor no longer has an obligation to pay a debt, that debt has been a. terminated. b. revoked. c. completed. d. discharged. 33. Kathleen filed for voluntary bankruptcy, and the automatic stay went into effect. The automatic stay a. acts to automatically discharge Kathleen's debts. b. prohibits creditors from collecting debts against Kathleen that arose before she filed bankruptcy. c. stops only secured creditors from taking any act to collect, assess, or recover a claim against Kathleen that arose before she filed bankruptcy. d. stops creditors from trying to collect from Kathleen, but it does not stop them from filing lawsuits against her. 34. Creditors of Northern Hydraulics file an involuntary bankruptcy petition against the company, and the petition is approved. What is true of Northern Hydraulics? a. Northern Hydraulics has at least $10,425 in debts. b. There are at least 12 creditors. c. A custodian has automatically been appointed. d. It must make all the filings necessary under a voluntary petition. 35. Under the federal Bankruptcy Code, the exemption amount for the debtor's personal residence is a. $23,675. b. $55,200. c. unlimited. d. $125,000.

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Chap 36_9e_Standard 36. In a voluntary petition, a claim of exemptions lists a. the names and addresses of all creditors. b. all assets that the debtor is entitled to keep. c. the debtor's job, income, and expenses. d. the debtor's assets and debts. 37. The correct order of payment of claims from the debtor's estate would be a. secured claims, priority claims, unsecured claims. b. secured claims, unsecured claims, priority claims. c. priority claims, secured claims, unsecured claims. d. priority claims, unsecured claims, secured claims. 38. Which is an example of a priority claim? a. alimony b. income tax c. child support d. All of these are correct. 39. A trustee can void any transfer that meets all of the following requirements EXCEPT a. if the transfer was to a creditor of the debtor. b. if the pre-petition payment was made in the ordinary course. c. if the transfer was used to pay an existing debt. d. if the debtor's liabilities exceeded assets at the time of the transfer. 40. Which of the following is a primary goal of the Bankruptcy Code? a. to preserve as much of the debtor's property as possible b. to pay off the debtor's creditors as quickly as possible c. to secure debt counseling for the debtor d. to keep the debtor from falling behind in payments 41. Artistic Framing, a business with $120,000 of unsecured debt, needs to file for bankruptcy but wants to continue in business. Discuss what chapter of the Bankruptcy Code should be used, and explain the plan of reorganization that should be used.

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