Exam 21: Creditors Rights and Bankruptcy

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Current City (CC)is a retail seller of television sets.CC sells Dhani a $3,000 large-screen,high-definition,LED set on a retail installment security agreement in which he pays $100 down and agrees to pay the balance in equal installments.CC retains a security interest in the set,and perfects that interest by filing a financing statement centrally.Two months later,Dhani is in default on the payments to CC and is involuntarily petitioned into bankruptcy by other creditors.Discuss CC's right to repossess the TV set and whether CC has priority over the trustee in bankruptcy.

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Question 1

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CC will not be able to repossess the set. The filing of the in voluntary petition in bank ruptcy operates as an automatic stay of any creditor's action against the debtor or the property of the debtor. If CC knowingly violates the automatic stay,CC could be liable to any injured party for actual damages suffered,all costs,reasonable attorneys' fees,and even possibly punitive damages. Therefore,CC's right of reposses sion is cut off by the bankruptcy proceeding. Because Dhani is a con sumer debtor,within thirty days of the filing of the peti tion or before the first creditor's meeting (whichever is first)Dhani must file with the clerk his intent as to the disposition of the TV set-that is,whether he in tends to retain the set,surrender the set to CC,claim the set as exempt,or reaffirm the debt. The trustee must carry out this intent within forty five days of this filing.Failure to act within this time frame terminates the automatic stay.CC does have a right of priority over the trustee. A trustee occupies the same position as a lien creditor,but a lien credi tor's priority is secondary to a previously perfected secured party.Thus,CC has priority to any proceeds from the disposal of the set.

If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors,the debtor is liable for the difference.

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(True/False)

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Question 2

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False

The homestead exemption under the Bankruptcy Code is unlimited.

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(True/False)

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Question 3

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False

On a debtor's bankruptcy,a secured creditor cannot recover more on a debt than the value of the collateral covering the debt.

(True/False)

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Question 4

A guaranty contract must be in writing to be enforceable.

(True/False)

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Question 5

Loni delivers her Mazda to be repaired at Nile's Body Shop.Loni agrees to pay cash.Nile performs,but Loni does not pay.Nile tells Loni that he will keep the car until she pays.This is

(Multiple Choice)

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Question 6

Larry borrows money from Joan.To use a writ of execution as a remedy,Joan must first

(Multiple Choice)

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Question 7

A surety is released from his or her obligation if the debtor pays it.

(True/False)

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Question 8

If a debtor will not pay a judgment,a creditor can only resort to "self-help" to collect.

(True/False)

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Question 9

Elle is a trustee for a federal bankruptcy court.Elle's duties include

(Multiple Choice)

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Question 10

Before the guarantor of a debt can be required to answer for the debt of a debtor,the debtor must have defaulted on the underlying obligation.

(True/False)

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Question 11

A Chapter 13 plan can be initiated only by the filing of an involuntary petition.

(True/False)

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Question 12

A homestead exemption allows a debtor to pay a fixed debt for an amount less than was actually owed.

(True/False)

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Question 13

Almost all types of property can be garnished.

(True/False)

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Question 14

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets,which Ewing still possesses.Ewing's lien on the sets will terminate

(Multiple Choice)

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Question 15

The Bankruptcy Code's Chapter 12 is intended to aid charitable institutions.

(True/False)

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Question 16

Debts based on fraud may be discharged under Chapter 13.

(True/False)

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Question 17

A surety can use any defenses available to a debtor to avoid liability on the obligation to the creditor.

(True/False)

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Question 18

A debtor's car may be exempt from satisfaction of a judgment debt.

(True/False)

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Question 19

If a surety pays the debt owed to a creditor,then the surety acquires any rights that the creditor had against the debtor.

(True/False)

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Question 20

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Exam 21: Creditors Rights and Bankruptcy

If the assets in a debtor's estate in bankruptcy are insufficient to pay fully all creditors,the debtor is liable for the difference.

The homestead exemption under the Bankruptcy Code is unlimited.

On a debtor's bankruptcy,a secured creditor cannot recover more on a debt than the value of the collateral covering the debt.

A guaranty contract must be in writing to be enforceable.

Loni delivers her Mazda to be repaired at Nile's Body Shop.Loni agrees to pay cash.Nile performs,but Loni does not pay.Nile tells Loni that he will keep the car until she pays.This is

Larry borrows money from Joan.To use a writ of execution as a remedy,Joan must first

A surety is released from his or her obligation if the debtor pays it.

If a debtor will not pay a judgment,a creditor can only resort to "self-help" to collect.

Elle is a trustee for a federal bankruptcy court.Elle's duties include

Before the guarantor of a debt can be required to answer for the debt of a debtor,the debtor must have defaulted on the underlying obligation.

A Chapter 13 plan can be initiated only by the filing of an involuntary petition.

A homestead exemption allows a debtor to pay a fixed debt for an amount less than was actually owed.

Almost all types of property can be garnished.

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets,which Ewing still possesses.Ewing's lien on the sets will terminate

The Bankruptcy Code's Chapter 12 is intended to aid charitable institutions.

Debts based on fraud may be discharged under Chapter 13.

A surety can use any defenses available to a debtor to avoid liability on the obligation to the creditor.

A debtor's car may be exempt from satisfaction of a judgment debt.

If a surety pays the debt owed to a creditor,then the surety acquires any rights that the creditor had against the debtor.

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