LAW 661 – Advanced Bankruptcy Law
Topic: Pre-Packaged Distress – Strategies & Ethics of Accelerated Corporate Restructuring
Quiz Format: Multiple Choice
1. What is a key characteristic of a prepackaged bankruptcy? A. It is only available under Chapter 7 B. It is filed without any creditor involvement C. It involves post-filing negotiations with creditors D. It secures creditor support before filing ✅ Correct Answer: D 📝 Explanation: A prepackaged bankruptcy involves negotiating and securing creditor support for a reorganization plan before filing, allowing for a faster and more efficient process under Chapter 11.
2. Which of the following is NOT a strategic advantage of a prepackaged bankruptcy? A. Increased legal costs B. Minimized business disruption C. Certainty due to pre-filing agreements D. Speed of resolution ✅ Correct Answer: A 📝 Explanation: Prepackaged bankruptcies are known for reducing legal and administrative costs, not increasing them. They offer speed, certainty, and minimal disruption.
3. What ethical concern is commonly associated with prepackaged bankruptcies? A. Excessive transparency B. Extended court proceedings C. Over-involvement of unsecured creditors D. Potential insider favoritism ✅ Correct Answer: D 📝 Explanation: Prepackaged bankruptcies may raise ethical concerns such as insider favoritism and lack of transparency, especially when unsecured creditors are excluded from negotiations.
4. Why was the FULLBEAUTY Brands case significant in the context of prepackaged bankruptcies? A. It was the first Chapter 7 prepack B. It was completed in just four days C. It involved no creditor negotiations D. It failed to gain court approval ✅ Correct Answer: B 📝 Explanation: The FULLBEAUTY Brands case was notable for being one of the fastest prepacks ever completed, finalized in just four days, setting a precedent for ultra-fast restructurings.
5. What is a ‘1-Day Prepack’? A. A liquidation strategy under Chapter 7 B. A restructuring completed within 24 hours of filing C. A plan that requires no creditor approval D. A court hearing that lasts one day ✅ Correct Answer: B 📝 Explanation: A ‘1-Day Prepack’ refers to a bankruptcy restructuring completed within 24 hours of filing, aimed at minimizing disruption and legal exposure.