Preview Questions Insolvency Specialist | Role Specific Skill

Question 1: In a distressed company, what is the impact of "overleveraging" on financial stability and solvency?

Which action should you take?

Choose only one option

Overleveraging reduces the cost of debt and strengthens the company's balance sheet

Overleveraging improves the company's credit rating and market value

Overleveraging increases the company's debt obligations, potentially leading to cash flow issues and insolvency

Overleveraging ensures better access to equity financing

Question 2: What is the impact of "bankruptcy fraud" on debt recovery proceedings?

Which action should you take?

Choose only one option

Bankruptcy fraud does not affect debt recovery, as it is primarily a criminal matter outside of the bankruptcy process

Bankruptcy fraud, such as hiding assets or making false statements, can result in penalties and can lead to the reversal of fraudulent transfers

Bankruptcy fraud results in immediate repayment to all creditors and cannot be contested

Bankruptcy fraud applies only to corporate bankruptcies and does not affect individual cases

Question 3: How do "secured creditors" differ from "unsecured creditors" in the bankruptcy process?

Which action should you take?

Choose only one option

Secured creditors can only claim repayment from assets not previously pledged to unsecured creditors

Secured creditors are automatically prioritized for repayment, while unsecured creditors are always paid last

Unsecured creditors are not entitled to any repayment in bankruptcy proceedings

Secured creditors have a claim to specific assets of the debtor, while unsecured creditors do not have collateral backing their claims

Question 4: What is the role of "voidable transactions" in bankruptcy proceedings?

Which action should you take?

Choose only one option

Voidable transactions are transfers made before bankruptcy that can be reversed by the bankruptcy trustee if deemed fraudulent or preferential

Voidable transactions apply only to unsecured creditors and not to secured creditors

Voidable transactions refer to the sale of assets that cannot be legally transferred under bankruptcy laws

Voidable transactions are those that involve family members and can be contested in court

Question 5: What is the role of "secured creditors" in debt recovery under insolvency law?

Which action should you take?

Choose only one option

Secured creditors are repaid last in the hierarchy of creditor claims in the insolvency process

Secured creditors must file a claim for their debts, which are paid only after unsecured creditors

Secured creditors are not involved in debt recovery processes in insolvency, as they are automatically discharged

Secured creditors have the right to recover their debts through the sale of collateral that was pledged by the debtor

Question 6: How do "debt covenants" impact a company in financial distress, and what is their role in debt recovery?

Which action should you take?

Choose only one option

Debt covenants protect creditors from potential fraud by the debtor

Debt covenants are irrelevant to financial distress, as they only apply to corporate governance

Debt covenants are conditions imposed by lenders to ensure the company maintains financial health, and violating them can accelerate default

Debt covenants allow the company to increase leverage during financial distress