Quiz: Fraudulent Transfers in Modern Bankruptcy

📚 LAW 661 – Advanced Bankruptcy Law
Topic: Fraudulent Transfers in Modern Bankruptcy
Quiz Format: Multiple Choice with Answers & Explanations

1. What is a fraudulent transfer in bankruptcy law? A. A legal gift to a creditor B. A transfer made to avoid taxes C. A transfer made to hinder, delay, or defraud creditors D. A payment made under court supervision ✅ Correct Answer: C 📝 Explanation: Fraudulent transfers are transactions made with intent to defraud creditors or for less than reasonably equivalent value when the debtor is insolvent.

2. Under which U.S. Code section are fraudulent transfers addressed in bankruptcy? A. 11 U.S.C. § 362 B. 11 U.S.C. § 548 C. 11 U.S.C. § 727 D. 11 U.S.C. § 1129 ✅ Correct Answer: B 📝 Explanation: Section 548 of the Bankruptcy Code governs fraudulent transfers, allowing trustees to avoid certain transfers made within two years before filing.

3. What is the “look-back” period for fraudulent transfers under federal bankruptcy law? A. 6 months B. 1 year C. 2 years D. 5 years ✅ Correct Answer: C 📝 Explanation: The Bankruptcy Code allows trustees to examine transfers made within two years prior to the bankruptcy filing.

4. What is “reasonably equivalent value” in the context of fraudulent transfers? A. The market value of the debtor’s assets B. The value of the transfer as judged by the court C. The fair value exchanged in a transaction D. The amount owed to the IRS ✅ Correct Answer: C 📝 Explanation: Reasonably equivalent value refers to fair consideration received by the debtor in exchange for the transfer.

5. Which party typically initiates an action to avoid a fraudulent transfer? A. The debtor B. The bankruptcy judge C. The trustee or debtor-in-possession D. The secured creditor ✅ Correct Answer: C 📝 Explanation: Trustees or debtors-in-possession have the authority to challenge and recover fraudulent transfers.

6. What is the difference between actual and constructive fraud in bankruptcy? A. Actual fraud involves criminal charges; constructive does not B. Actual fraud requires intent; constructive fraud does not C. Constructive fraud is always legal D. Actual fraud is based on negligence ✅ Correct Answer: B 📝 Explanation: Actual fraud requires intent to defraud, while constructive fraud involves transfers made without fair value when the debtor was insolvent.

7. Which of the following is a sign of actual fraudulent intent? A. Transfer to an unrelated third party B. Transfer made in the ordinary course of business C. Transfer to an insider shortly before bankruptcy D. Transfer with full documentation ✅ Correct Answer: C 📝 Explanation: Transfers to insiders close to the bankruptcy filing are red flags for actual fraudulent intent.

8. What is the Uniform Fraudulent Transfer Act (UFTA)? A. A federal law governing bankruptcy B. A state law model for addressing fraudulent transfers C. A tax regulation D. A criminal statute ✅ Correct Answer: B 📝 Explanation: UFTA is a model state law that complements federal bankruptcy provisions and allows longer look-back periods.

9. How long is the look-back period under UFTA in many states? A. 1 year B. 2 years C. 4 years D. 10 years ✅ Correct Answer: C 📝 Explanation: Many states adopting UFTA allow trustees to challenge transfers made up to four years before filing.

10. What is the consequence of a successful fraudulent transfer claim? A. The debtor is released from all debts B. The transfer is voided and assets returned to the estate C. The creditor is fined D. The bankruptcy case is dismissed ✅ Correct Answer: B 📝 Explanation: If a transfer is deemed fraudulent, it can be reversed and the assets recovered for the benefit of creditors.

11. Which of the following is considered an “insider” under bankruptcy law? A. A competitor B. A government agency C. A family member or corporate officer D. A customer ✅ Correct Answer: C 📝 Explanation: Insiders include relatives, directors, officers, or persons in control of the debtor.

12. Can a fraudulent transfer occur even if the debtor had no intent to defraud? A. No, intent is always required B. Yes, under constructive fraud provisions C. Only if the transfer was over $1 million D. Only in criminal cases ✅ Correct Answer: B 📝 Explanation: Constructive fraud does not require intent; it focuses on lack of fair value and insolvency.

13. What is the role of the court in fraudulent transfer cases? A. To approve all transfers B. To determine if the transfer meets fraud criteria C. To represent the debtor D. To act as a mediator ✅ Correct Answer: B 📝 Explanation: Courts evaluate evidence to determine whether a transfer was fraudulent under bankruptcy law.

14. What is a common defense against a fraudulent transfer claim? A. The debtor was insolvent B. The transfer was made to an insider C. The transfer was for reasonably equivalent value D. The debtor intended to defraud ✅ Correct Answer: C 📝 Explanation: Showing that the transfer was made for reasonably equivalent value is a key defense.

15. Why are fraudulent transfer laws important in bankruptcy? A. They punish debtors B. They protect secured creditors only C. They ensure fair distribution of assets to creditors D. They allow debtors to hide assets ✅ Correct Answer: C 📝 Explanation: Fraudulent transfer laws prevent asset concealment and ensure equitable treatment of creditors.

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