Question 1

Perfection can occur merely by possession of the collateral by the creditor.

Accepted Answer

A) True 
 B)False  True

Question 2

The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a termination statement by the creditor and the presentation of the statement to the filing officer, who marks the record "terminated."

Accepted Answer

A) True 
 B)False  True

Question 3

Consumer goods are classified into different categories based on the debtor's intended use, not the physical characteristics of the goods.

Accepted Answer

A) True 
 B)False  True

Question 4

A security interest will be perfected without filing when:

Accepted Answer

A)  the transaction involves any consumer goods. 
B)  the transaction involves inventory goods. 
C)  the transaction involves equipment. 
D)  the transaction involves a purchase money security interest in consumer goods. 
A)  the transaction involves any consumer goods. 
B)  the transaction involves inventory goods. 
C)  the transaction involves equipment. 
D)  the transaction involves a purchase money security interest in consumer goods.

Question 5

For a security interest to attach, the creditor must file a financing statement.

Accepted Answer

A) True 
 B)False

Question 6

Compulsory resale of collateral is not recognized by the Uniform Commercial Code.

Accepted Answer

A) True 
 B)False

Question 7

Self-help repossession of collateral upon a buyer's default is contrary to public policy and never is allowed.

Accepted Answer

A) True 
 B)False

Question 8

When a state statute requires a security interest in a motor vehicle to be noted on the certificate of title, the security interest is perfected:

Accepted Answer

A)  by the certificate notation, when a non-inventory motor vehicle is involved. 
B)  by filing under the UCC, regardless of how the vehicle is classified. 
C)  by filing under the UCC, when the motor vehicle is inventory. 
D)  either by the certificate notation or by a UCC filing, depending on how the state statute defines the term motor vehicle. 
A)  by the certificate notation, when a non-inventory motor vehicle is involved. 
B)  by filing under the UCC, regardless of how the vehicle is classified. 
C)  by filing under the UCC, when the motor vehicle is inventory. 
D)  either by the certificate notation or by a UCC filing, depending on how the state statute defines the term motor vehicle.

Question 9

When a seller sells on credit and is given a security interest in the goods, that interest is called:

Accepted Answer

A)  a purchase money security interest. 
B)  a future transaction. 
C)  a floating lien. 
D)  none of the above. 
A)  a purchase money security interest. 
B)  a future transaction. 
C)  a floating lien. 
D)  none of the above.

Question 10

A debtor has sufficient rights in the collateral for a security interest to attach only if the debtor owns the collateral.

Accepted Answer

A) True 
 B)False

Question 11

A security interest gives a creditor more protection than is afforded by a right to sue on the debt.

Accepted Answer

A) True 
 B)False

Question 12

King Electronics, a retailer of video equipment, sold two DVRs to Larson, a psychologist, for use in her professional practice, which was located in her home. The sale to Larson was made on credit. King retained a security interest in the DVRs sold but did not file a financing statement. Mills, another creditor of Larson, has asserted that his lien on the two DVRs is superior to King's security interest. Is he right? As you decide, remember to classify the DVRs as collateral in the hands of King and Larson.

Accepted Answer

Judgment will be for Mills. The DVRs are

Question 13

A financing statement need not be filed in a public place.

Accepted Answer

A) True 
 B)False

Question 14

Perfection of a security interest takes place:

Accepted Answer

A)  upon the creditor's possession of the collateral. 
B)  upon attachment in the case of a purchase money security interest in consumer goods. 
C)  upon the filing of a financing statement. 
D)  all of the above. 
A)  upon the creditor's possession of the collateral. 
B)  upon attachment in the case of a purchase money security interest in consumer goods. 
C)  upon the filing of a financing statement. 
D)  all of the above.

Question 15

In most cases, value, which allows attachment of a security interest, is any consideration that supports a simple contract.

Accepted Answer

A) True 
 B)False

Question 16

A(n) __________ statement is a document, which may be requested by a paid-up debtor, stating that a security interest is no longer claimed under the specified financing statement.

Accepted Answer

A)  execution 
B)  discharge 
C)  termination 
D)  hold harmless 
A)  execution 
B)  discharge 
C)  termination 
D)  hold harmless

Question 17

UCC Article 9 makes a statutory lien for repairs or storage subordinate to a perfected security interest in the same collateral.

Accepted Answer

A) True 
 B)False

Question 18

Under Revised UCC Article 9, a financing statement must be signed by the debtor.

Accepted Answer

A) True 
 B)False

Question 19

Consumer goods are not subject to perfection of a security interest.

Accepted Answer

A) True 
 B)False

Question 20

A buyer in the ordinary course of business who purchases inventory goods from a debtor who had placed a security interest on those goods in favor of a creditor:

Accepted Answer

A)  is not subject to the security interest. 
B)  is not subject to the security interest unless it was perfected. 
C)  is not subject to the security interest unless the buyer was aware of it. 
D)  is subject to the security interest. 
A)  is not subject to the security interest. 
B)  is not subject to the security interest unless it was perfected. 
C)  is not subject to the security interest unless the buyer was aware of it. 
D)  is subject to the security interest.

Exam 34: Secured Transactions in Personal Property

Perfection can occur merely by possession of the collateral by the creditor.

The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a termination statement by the creditor and the presentation of the statement to the filing officer, who marks the record "terminated."

Consumer goods are classified into different categories based on the debtor's intended use, not the physical characteristics of the goods.

A security interest will be perfected without filing when:

For a security interest to attach, the creditor must file a financing statement.

Compulsory resale of collateral is not recognized by the Uniform Commercial Code.

Self-help repossession of collateral upon a buyer's default is contrary to public policy and never is allowed.

When a state statute requires a security interest in a motor vehicle to be noted on the certificate of title, the security interest is perfected:

When a seller sells on credit and is given a security interest in the goods, that interest is called:

A debtor has sufficient rights in the collateral for a security interest to attach only if the debtor owns the collateral.

A security interest gives a creditor more protection than is afforded by a right to sue on the debt.

A financing statement need not be filed in a public place.

Perfection of a security interest takes place:

In most cases, value, which allows attachment of a security interest, is any consideration that supports a simple contract.

A(n) __________ statement is a document, which may be requested by a paid-up debtor, stating that a security interest is no longer claimed under the specified financing statement.

UCC Article 9 makes a statutory lien for repairs or storage subordinate to a perfected security interest in the same collateral.

Under Revised UCC Article 9, a financing statement must be signed by the debtor.

Consumer goods are not subject to perfection of a security interest.

A buyer in the ordinary course of business who purchases inventory goods from a debtor who had placed a security interest on those goods in favor of a creditor:

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