What is liquidation? How does the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 affect the process of liquidation?
What will be an ideal response?
In liquidation, the debtor is permitted to keep a substantial portion of his or her assets (exempt assets); the debtor's nonexempt property is sold for cash, and the cash is distributed to the creditors; and any of the debtor's unpaid debts are discharged. The debtor's future income, even if he or she becomes rich, cannot be reached to pay the discharged debt. The 2005 act substantially restricts the ability of many debtors to obtain a Chapter 7 liquidation bankruptcy. The 2005 act added the median income test and the dollar-based means test that a debtor must pass before being permitted to obtain a discharge of debts under Chapter 7. Thus, the 2005 act reduces the number of debtors who can escape their prepetition debts entirely.
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The income statement for Sweet Dreams Company is divided by its two product lines, blankets and pillows, as follows
Blankets Pillows Total Sales revenue $820,000 $300,000 $1,120,000 Variable costs 465,000 240,000 705,000 Contribution margin 355,000 60,000 415,000 Fixed costs 66,000 76,000 142,000 Operating income (loss) $289,000 $(16,000 ) $273,000 If Sweet Dreams can eliminate total fixed costs of $28,000 by dropping the pillows line, operating income will increase by $16,000. Indicate whether the statement is true or false
Finance charges always include which of the following?
a. Mortgage broker fee b. Title insurance charges c. Document preparation fees d. Credit report fee