Exam 32: Credit and Security

Any transaction in which debt payment is guaranteed by personal property is a secured transaction.

When a debtor defaults, a secured creditor can give up the security interest and sue on the underlying debt.

Bert, Chaka, and Doug are co-sureties of Erica's debt to Finance Loan Company. Bert pays Erica's entire debt. Bert's right to seek proportionate payments from Chaka and Doug is the right of

Kris borrows from Lender Inc. and Mortgage Company, using the same collateral for both loans. Mortgage Company perfects the security interest but Lender does not. Kris defaults on both loans. The party with first rights to the collateral is

Kelly's Autos Inc. borrows funds from Lenders Finance Company under a security agreement. Later, Kelly's buys new vehicles to add to its inventory. Lenders has a security interest in the new vehicles

A financing statement is a legal term for the debtor's bank statements and list of assets.

To create an enforceable security interest, the collateral must be held by a neutral third party until the debt is paid.

Brewery Company's debt to Credit Service is past due. Credit obtains a judgment against Brewery, but the firm refuses to pay. Credit asks the court to order the seizure of Brewery's property. This is a request for

There is no legal process where a creditor can gain access to a debtor's property that is being held by a third party.

Construction Company has a claim against Diner's Café to satisfy a debt for work done on Diner's building. This claim takes priority over other claims against the same property. This is

Attachment ensures that a security interest between a debtor and a secured party is effective.

General Contractors Inc. holds a lien on Home Estate's real property. The property can be sold to satisfy the debt

Country Financial Corporation is a secured party with a security interest in property owned by Delta Farms. Perfection of this security interest may not protect Country Financial against the claim of

To create an enforceable security interest, a debtor does not need to have legal rights to the collateral.

Business Sales Inc.'s debt to Cartage Company is past due. Cartage brings a legal action against Business Sales to collect. To ensure that a judgment in the creditor's favor will be collectible once the court issues its judgment, Cartage asks the court to order the seizure of the debtor's property. This is a request for

When a debtor defaults, a secured creditor cannot take peaceful possession of the collateral without going to court.

Gail borrows funds from Harbor Loans Inc. to buy a boat, which is the collateral for the loan. Gail defaults on the debt. Harbor Loans takes possession of the boat and notifies Gail that it will be sold to recover some of the unpaid debt. Before Harbor Loans sells the boat, Gail can pay the lender what she owes and take back the boat. This is

Refresh Inc.'s debt to Spring Water Company is past due. Spring brings a legal action against Refresh to collect the debt. Spring asks the court to order Tempo Bank, in which Refresh has an account, to pay a portion of the funds to Spring. This is a request for

A writ of execution is a court-ordered seizure and taking into custody of property before a judgment is obtained on a past-due debt.

A mechanic's lien normally takes priority over perfected security interests in the property.