Legal & Regulatory Compliance in Credit Management Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Legal & Regulatory Compliance in Credit Management flashcards as text
A supplier ships goods to a customer on open credit terms. The customer then files for Chapter 7 bankruptcy before paying. The supplier's claim would typically be classified as:
Answer: An unsecured general creditor claim
Without a perfected security interest, a supplier holding an unpaid invoice is treated as an unsecured general creditor in bankruptcy, receiving payment only after secured and priority creditors are paid.
What is the 'absolute priority rule' in Chapter 11 bankruptcy reorganization?
Answer: Senior creditors must be paid in full before junior creditors or equity holders receive anything under a reorganization plan
The absolute priority rule requires that in a Chapter 11 plan, each class of creditors must be paid in full (or consent) before any junior class or equity interest holders receive any distribution.
Which of the following best describes a 'standstill agreement' in a distressed credit situation?
Answer: A voluntary agreement where creditors agree to temporarily suspend collection actions while the debtor attempts a restructuring
A standstill agreement is a voluntary arrangement in which creditors agree to temporarily refrain from enforcing their rights, giving the debtor time to develop a restructuring or repayment plan.
Under the Uniform Fraudulent Transfer Act (UFTA), what is the typical look-back period for challenging a fraudulent transfer made with actual intent to defraud creditors?
Answer: 4 years
Under the UFTA, a transfer made with actual intent to defraud creditors can be challenged within 4 years after the transfer was made or within 1 year after it could reasonably have been discovered.
A credit manager is evaluating whether a new customer's business structure provides limited liability protection. Which entity type does NOT automatically provide limited liability to its owners?
Answer: General Partnership
A general partnership does not provide limited liability protection; all general partners are personally and jointly liable for the debts and obligations of the partnership.
What is the purpose of a 'comfort letter' provided by a parent company when its subsidiary applies for credit?
Answer: It provides a moral assurance (but not a legal guarantee) that the parent supports the subsidiary's obligations
A comfort letter is a non-binding statement from a parent company expressing support for a subsidiary's obligations; it is not a legal guarantee and creates no enforceable legal obligation.
Under the Bank Secrecy Act (BSA), what is the threshold dollar amount that triggers a mandatory Currency Transaction Report (CTR) filing?
Answer: $10,000
The Bank Secrecy Act requires financial institutions to file a Currency Transaction Report (CTR) for cash transactions exceeding $10,000 in a single business day.