Exam 21: Security Interests and Creditors Rights

Debit & Credit Financing, Inc., and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation. Priority between these security interests is generally determined by​

A surety is primarily liable for the debt of a principal.

A defaulting debtor cannot redeem nonexempt property before a sale under a writ of execution.

Custom Cabinets & Carpentry Company has a claim against Duane's property to satisfy a debt that takes priority over other claims against the same property. This is​

A creditor must exhaust all legal remedies against the principal debtor before holding the surety responsible for payment.

A guaranty contract must normally be in writing to be enforceable.

A surety can use any defenses available to the principal debtor to avoid liability on the debt.

A guarantor is secondarily liable on an obligation.

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

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine, which Petra still possesses at her repair shop. Petra's lien on the machine will terminate​

In some states, a judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.

A security agreement does not need to contain a description of the collateral.

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation. Between these interests, the first to be filed or perfected has priority over other filed or perfected security interests in​

A purchase-money security interest in consumer goods is created when a person buys goods on credit.

The payment of Olinda's debt to Pari is guaranteed by Olinda's personal property. Pari is most likely to perfect her interest by​

A guarantor can be required to pay an obligation only after the principal debtor defaults.

In the context of judicial liens, an attachment is a court-ordered seizure and taking into custody of property before a judgment is obtained on a past-due debt.

Fact Pattern 21-1 Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application. -Refer to Fact Pattern 21-1. If, after the loan agreement is signed, Slick agrees to a higher rate of interest without telling Tina, then Tina is​

Kayla's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Kayla's buys six Miatas. The Miatas are​

A secured party is any creditor who has a security interest in a debtor's collateral.