March 2019 LACBA MCLE Test and Answer Sheet


Test No. 286: Bankruptcy Bargains

To access the article related to this test, please click here. The article will open in a separate window.
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 $25 testing fee ($35 for non-LACBA members) to:

Los Angeles County Bar Association
Attn: Los Angeles Lawyer MCLE Test
P.O. Box 55020
Los Angeles, CA 90055

Make checks payable to Los Angeles County Bar Association.

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-study 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. Which section of the Bankruptcy Code governs sales that take place in a bankruptcy case?

2. The Bankruptcy Code only deals with sales in the “ordinary course” of a debtor’s business.

3. Sales in the ordinary course of a debtor’s business require bankruptcy court approval.

4. Bankruptcy sales could either be public or private.

5. The bankruptcy court will approve a sale if it is supported by a sound business reason and based on the sound exercise of the debtor’s business judgment.

6. A non-ordinary course sale may be effectuated only through a noticed motion under Bankruptcy Code Section 363(b).

7. The seller of the assets in a bankruptcy case has no discretion in determining which bid is the successful bid.

8. A buyer of bankruptcy assets has the ability to purchase the assets free and clear of any existing liens, encumbrances, claims, or other interests.

9. How many different circumstances does the Bankruptcy Court delineate under which a bankruptcy court may approve a sale free and clear of any existing liens, encumbrances, claims, or other interests?

10. A bankruptcy sale could sell free and clear of a lien if the claim that the lien secures is in dispute.

11. Purchasing assets out of bankruptcy provides protection from any future accusations that the sale involved an improper price, a fraudulent transfer, or other form of misdealing.

12. Purchasing an asset out of bankruptcy necessarily means the buyer is buying the asset at a discount.

13. When a sale is effectuated through a confirmed (approved) Chapter 11 plan, it is exempt from transfer taxes.

14. From a buyer’s perspective, it is preferable to be a subsequent qualified bidder at the auction rather than the “stalking horse” bidder.

15. Break-up fees are not permitted under any circumstances in bankruptcy sales.

16. Bankruptcy sales are better for the buyer because it comes with significant representations and warranties.

17. Collusive bidding is not permitted and subjects colluding parties to liability.

18. A potential downside to a buyer of bankruptcy assets is that the debtor or its principal may not be cooperative in the sale process.

19. Bankruptcy sales are not subject to appeal.

20. One way to mitigate the risk of effects of a reversal of an order approving a sale on appeal is to ensure the seller obtains a “good faith” finding under the Bankruptcy Code.


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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.