Question 1

A security interest must be in writing,unless the creditor has possession of the collateral.

Accepted Answer

A) True 
 B)False

Question 2

Bob owes an unsecured debt of $10,000 to a credit card company.Bob stops making payments.The credit card company gets a judgment against him for $10,000.Bob owns a personal watercraft worth $4,000,he earns $500 per week at his job,and he has a savings account at a local bank with a balance of $2,000.Discuss the concepts of attachment,execution,and garnishment,what steps the credit card company could take to get its money,and any protections Bob has under the Consumer Credit Protection Act.

Accepted Answer

Attachment is a pre-judgment court order

Question 3

A deficiency judgment can be issued in all states any time that a debtor has been deficient in repaying a debt.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true?

Accepted Answer

A)  The creditor is generally not entitled to obtain a deficiency judgment where the collateral is goods, even if their sale does not cover the amount owed on the underlying debt. 
B)  The right of redemption for collateral extends until a reasonable time after its disposal. 
C)  To exercise the right of redemption, the debtor must not only pay the amount owed, but also all expenses reasonably incurred by the secured party in retaking and holding the collateral, and any attorney's fees and legal expenses provided for in the security agreement and not prohibited by law. 
D)  Deficiency judgments are generally against public policy, unless reasonable in amount. 
E)  Redemption rights are not available for personal property. 
A)  The creditor is generally not entitled to obtain a deficiency judgment where the collateral is goods, even if their sale does not cover the amount owed on the underlying debt. 
B)  The right of redemption for collateral extends until a reasonable time after its disposal. 
C)  To exercise the right of redemption, the debtor must not only pay the amount owed, but also all expenses reasonably incurred by the secured party in retaking and holding the collateral, and any attorney's fees and legal expenses provided for in the security agreement and not prohibited by law. 
D)  Deficiency judgments are generally against public policy, unless reasonable in amount. 
E)  Redemption rights are not available for personal property.

Question 5

In a mortgage,the debtor is the mortgagee.

Accepted Answer

A) True 
 B)False

Question 6

A creditor who has repossessed collateral may choose to retain it:

Accepted Answer

A)  in all circumstances. 
B)  in all circumstances, unless the secured party receives an appropriate notice within twenty-one days. 
C)  in all circumstances where the debtor willfully did not pay the debt. 
D)  in all circumstances, unless the secured party receives a written objection to the proposal from a person entitled to receive notice within twenty days after the notice was sent, or the debt involves consumer goods and the debtor has paid sixty percent of the cash price or loan. 
E)  in all circumstances, unless the secured party receives an appropriate notice within thirty days. 
A)  in all circumstances. 
B)  in all circumstances, unless the secured party receives an appropriate notice within twenty-one days. 
C)  in all circumstances where the debtor willfully did not pay the debt. 
D)  in all circumstances, unless the secured party receives a written objection to the proposal from a person entitled to receive notice within twenty days after the notice was sent, or the debt involves consumer goods and the debtor has paid sixty percent of the cash price or loan. 
E)  in all circumstances, unless the secured party receives an appropriate notice within thirty days.

Question 7

Which of the following has to do with property in the possession of third parties?

Accepted Answer

A)  attachment 
B)  execution 
C)  garnishment 
D)  composition 
E)  accommodation 
A)  attachment 
B)  execution 
C)  garnishment 
D)  composition 
E)  accommodation

Question 8

Perfection does not always protect a secured party from third-party claims.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following items does not need to be included in a financing statement?

Accepted Answer

A)  the debtor's name 
B)  the debtor's mailing address 
C)  the secured party's name 
D)  a description of the collateral 
E)  a description of what circumstances would trigger a default in the underlying loan agreement 
A)  the debtor's name 
B)  the debtor's mailing address 
C)  the secured party's name 
D)  a description of the collateral 
E)  a description of what circumstances would trigger a default in the underlying loan agreement

Question 10

In a strict surety arrangement,the surety assumes primary liability on another person's debt.

Accepted Answer

A) True 
 B)False

Question 11

If a mortgage is not recorded,the rights and obligations regarding the mortgage are not enforceable against the parties to the mortgage.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true about the distinction between secured and unsecured credit?

Accepted Answer

A)  Secured debt is debt that has already been paid, while unsecured debt has not yet been paid. 
B)  Unsecured debt is expected to be collected, whereas collection of secured debt is doubtful. 
C)  Secured debt will be collected over a time period of more than one year, while unsecured debt is expected to be collected within one year. 
D)  Secured debt has collateral associated with it, while unsecured debt has no associated collateral. 
E)  Secured debt results from a court judgment, whereas unsecured debt results from an agreement between the parties. 
A)  Secured debt is debt that has already been paid, while unsecured debt has not yet been paid. 
B)  Unsecured debt is expected to be collected, whereas collection of secured debt is doubtful. 
C)  Secured debt will be collected over a time period of more than one year, while unsecured debt is expected to be collected within one year. 
D)  Secured debt has collateral associated with it, while unsecured debt has no associated collateral. 
E)  Secured debt results from a court judgment, whereas unsecured debt results from an agreement between the parties.

Question 13

Sally agrees to be surety for her brother Dan in his purchase of a computer from a local dealer.The dealer extended $2,000 in credit to Dan to enable him to purchase the computer,and took a security interest in the computer.The dealer does not file a financing statement.Dan does not pay for the computer,because it is defective.The dealer repossesses it and sells it for $400,a reasonable amount.If the computer dealer seeks to recover from Sally,how much can it recover?

Accepted Answer

A)  nothing, because it did not file a financing statement 
B)  nothing, assuming the computer is actually defective 
C)  $1,600 
D)  $1,600, but only if it has unsuccessfully tried first to collect from Dan 
E)  $2,000 
A)  nothing, because it did not file a financing statement 
B)  nothing, assuming the computer is actually defective 
C)  $1,600 
D)  $1,600, but only if it has unsuccessfully tried first to collect from Dan 
E)  $2,000

Question 14

Security interests may be taken in real property.

Accepted Answer

A) True 
 B)False

Question 15

The terms "accommodation party" and "cosigner" are synonymous.

Accepted Answer

A) True 
 B)False

Question 16

Pat went to Eighth National Bank in Oregon and obtained a loan to purchase a computer from a friend.Pat signed a security agreement granting the bank a security interest in the computer.Pat planned to use this computer in his home-based publishing business.The bank gave Pat $2,500 to use in purchasing the computer.However,Pat immediately went to Las Vegas without purchasing the computer,and has not been seen since.The bank has filed a financing statement covering the computer.The bank wants the computer.Can the bank get the computer?

Accepted Answer

A)  yes, because the computer is equipment 
B)  yes, so long as no one else had an earlier perfected security interest in the computer 
C)  no, because Pat is no longer in the state of Oregon 
D)  no, because a security interest has not attached 
E)  no, because the bank must first try to collect from Pat 
A)  yes, because the computer is equipment 
B)  yes, so long as no one else had an earlier perfected security interest in the computer 
C)  no, because Pat is no longer in the state of Oregon 
D)  no, because a security interest has not attached 
E)  no, because the bank must first try to collect from Pat

Question 17

Mike purchases a bicycle from Bikes R Us on credit,and signs a financing statement.Bikes R Us does not record the statement.After a job transfer,Mike decides not to take the bike with him,and he sells the bike to Mario.Mike still has payments due,but Mario has no idea that money is still owed.Mario purchased the bike to use in his bicycle touring company,which he operates for profit on a part-time basis.If Bikes R Us can locate Mario and the bike,can they repossess it?

Accepted Answer

Yes,they can.Even though the bike was or

Question 18

The non-recordation of a mortgage or deed of trust affects the legality of the instrument between the mortgagor and the mortgagee.

Accepted Answer

A) True 
 B)False

Question 19

Execution is a pre-judgment court order that permits the seizure of a debtor's property that is in the debtor's possession while a lawsuit against the debtor is pending.

Accepted Answer

A) True 
 B)False

Question 20

Sam went to Stable National Bank,borrowed $1,000,and granted a security interest in his sailboat to the bank.This security interest attached on March 1,and was perfected when the bank filed a financing statement on May 15.On April 12,Sam went to Solid National Bank,borrowed $2,000,and granted a security interest in the same sailboat.Solid perfected its security interest by filing a financing statement on April 20.Sam defaulted on both loans in June,having paid off none of the principal on either loan.Both banks want to repossess the boat.If the boat can be sold for $1,200,how much of the $1,200 would each bank be entitled to receive?

Accepted Answer

A)  Stable is entitled to receive $1,000, and Solid is entitled to receive nothing. 
B)  Stable is entitled to receive $1,000, and Solid is entitled to receive $200. 
C)  Stable is entitled to receive $400, and Solid is entitled to receive $800. 
D)  Stable is entitled to receive nothing, and Solid is entitled to receive $800. 
E)  Stable is entitled to receive nothing, and Solid is entitled to receive $1,200. 
A)  Stable is entitled to receive $1,000, and Solid is entitled to receive nothing. 
B)  Stable is entitled to receive $1,000, and Solid is entitled to receive $200. 
C)  Stable is entitled to receive $400, and Solid is entitled to receive $800. 
D)  Stable is entitled to receive nothing, and Solid is entitled to receive $800. 
E)  Stable is entitled to receive nothing, and Solid is entitled to receive $1,200.

Exam 23: Credit and Secured Transactions

A security interest must be in writing,unless the creditor has possession of the collateral.

A deficiency judgment can be issued in all states any time that a debtor has been deficient in repaying a debt.

Which of the following is true?

In a mortgage,the debtor is the mortgagee.

A creditor who has repossessed collateral may choose to retain it:

Which of the following has to do with property in the possession of third parties?

Perfection does not always protect a secured party from third-party claims.

Which of the following items does not need to be included in a financing statement?

In a strict surety arrangement,the surety assumes primary liability on another person's debt.

If a mortgage is not recorded,the rights and obligations regarding the mortgage are not enforceable against the parties to the mortgage.

Which of the following is true about the distinction between secured and unsecured credit?

Security interests may be taken in real property.

The terms "accommodation party" and "cosigner" are synonymous.

The non-recordation of a mortgage or deed of trust affects the legality of the instrument between the mortgagor and the mortgagee.

Execution is a pre-judgment court order that permits the seizure of a debtor's property that is in the debtor's possession while a lawsuit against the debtor is pending.

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