Chapter 14 Practice Questions
- 1. Thinly Capitalized Inc. files for Chapter 7 bankruptcy. The company’s assets are liquidated. After all secured creditors have been paid, the money remaining is insufficient to pay all unsecured creditors in full. Rank the following categories of unsecured claims in order from highest to lowest priority:
- I. Claims for unpaid salaries earned within 180 days before the bankruptcy filing
- II. Claims of preferred shareholders
- III. Claims of trade suppliers
- IV. Administrative expenses of the bankruptcy
- A. I, III, II, IV
- B. IV, II, III, I
- C. II, III, IV, I
- D. IV, I, III, II
- 2. Tenuous Inc. has filed for Chapter 11 bankruptcy. Following the filing, Senseless Risk Bank extends credit to Tenuous. This arrangement is commonly known as:
- A. A Section 363 loan
- B. Pre-liquidation financing
- C. Event-of-default financing
- D. Debtor-in-possession financing
