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  Los Angeles Lawyer
The Magazine of the Los Angeles County Bar Association
 
 

July/August 2013     MCLE Test and Answer Sheet

Test No. 226: Bankruptcy Shelters

 
 

Instructions for Obtaining MCLE Credit

The Los Angeles County Bar Association certifies that this activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour. To apply for credit, please follow the instructions.

1. Study the CLE article.

2. Answer the test questions by marking the appropriate boxes. Each question has only one answer.

3. Photocopies of this answer sheet may be submitted; however, this form should not be enlarged or reduced. Mail the answer sheet and the $20 testing fee ($25 for non-LACBA members) to:

Los Angeles Lawyer
MCLE Test
P.O. Box 55020
Los Angeles, CA 90055 

Make checks payable to Los Angeles Lawyer.

4. You can also fill in the test form and submit it directly to LACBA by clicking "Submit." To submit your test answers online you will need to pay by credit card. After submitting your answers you will be presented with a screen requesting payment information. This information will be submitted in a secure mode which will allow you to safely transmit your credit card number over the Internet. If you prefer not to pay by credit card, please print this answer sheet and submit your responses by regular mail.

5. Within six weeks, Los Angeles Lawyer will return your test with the correct answers, a rationale for the correct answers, and a certificate verifying the CLE credit you earned through this self-assessment activity.

6. For future reference, please retain the CLE test materials returned to you.

 
  Test Sheet
 
 

Mark your answers to the test by clicking next to your choice.  All questions must be answered.  Each question has only one answer. This test is worth 1 hour of credit.*  

1. The general prohibition under the Bankruptcy Code on actions undertaken to enforce or collect upon a debtor's prebankruptcy debt while a bankruptcy case is pending is called:
 A. The statute of repose.
 B. The automatic stay.
 C. The standstill period.
 D. None of the above.

2. This general prohibition includes not only the commencement or continuation of litigation against a bankruptcy debtor but also nonjudicial enforcement mechanisms such as foreclosure.
 True.
 False.

3. When a bankruptcy court grants a creditor permission to resume efforts to collect its debt while the bankruptcy case is still pending, the creditor has been given:
 A. The green light.
 B. Standstill relief.
 C. Relief from stay.
 D. None of the above.

4. The common name for a provision in a loan document to the effect that a borrower's bankruptcy filing (or insolvency) constitutes a breach is:
 A. An ipso facto clause.
 B. A default provision.
 C. A penalty clause.
 D. None of the above.

5. Courts will generally enforce the provision described in question 4.
 True.
 False.

6. Courts will generally enforce loan document provisions to the effect that, if a debtor does file bankruptcy, it waives certain benefits of bankruptcy law.
 True.
 False.

7. A single purpose entity (SPE) is a type of borrower that some secured lenders favor to mitigate the disruption caused by a bankruptcy filing by all or some of the members of a corporate group.
 True.
 False.

8. Most commonly, SPEs are either _____.
 A. Public or private corporations.
 B. Nonprofit corporations or business trusts.
 C. Limited partnerships or limited liability companies.
 D. None of the above.

9. Provisions in an SPE's corporate documents to make the SPE less likely to become insolvent and more difficult for it to go into bankruptcy are commonly referred to as ____ .
 A. Ipso facto clauses.
 B. Bankruptcy remote provisions.
 C. Antialienation provisions.
 D. None of the above.

10. SPEs are a securitization tool for lenders.
 True.
 False.

11. In In re Kingston Square Associates, the bankruptcy court held that a bankruptcy petition should be dismissed upon finding subjective bad faith in filing.
 True.
 False.

12. The Kingston Square Associates court dismissed the bankruptcy cases because the debtors solicited creditors to file involuntary bankruptcy petitions against them.
 True.
 False.

13. In re General Growth Properties, Inc., involved provisions in the organizational documents of the SPEs that required the unanimous consent of one or more nominally independent directors or managers before the SPEs could file for bankruptcy.
 True.
 False.

14. The General Growth Properties court held that it was bad faith for the debtors to circumvent the efforts of their secured lenders to make their loans bankruptcy proof.
 True.
 False.

15. The Kingston Square Associates and General Growth Properties courts determined that the attempts of the secured lenders to make their loans bankruptcy proof were against public policy.
 True.
 False.

16. In In re DB Capital Holdings, LLC, the court upheld, against a public policy challenge, a provision in an LLC's operating agreement prohibiting the LLC from filing for bankruptcy or consenting to any bankruptcy filed against it.
 True.
 False.

17. The DB Capital Holdings court found that the operating agreement's antibankruptcy provision had been inserted at the behest of the debtor's secured lender.
 True.
 False.

18. The secured lender in DB Capital Holdings was successful in keeping the borrower out of bankruptcy court.
 True.
 False.

19. If a lender's "independent" designee with the SPE borrower vetoes a bankruptcy filing that would be in the borrower's best interest, the lender or its designee may be liable for breach of fiduciary duty.
 True.
 False.

20. Some LLC operating agreements name a designee of the lender as a member of the LLC even though the designee is not required to make a capital contribution.
 True.
 False.

Address and Billing

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* The Los Angeles County Bar Association has been approved as a continuing legal education provider of Minimum Continuing Legal Education credit by the State Bar of California. This self-assessment activity will qualify for Minimum Continuing Legal Education credit by the State Bar of California in the amount of one hour.

 


 
   
 

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