Deck 13: Credit, Secured Transactions, and Bankruptcy

Question 1

To be valid, a security agreement must set forth the creditor's rights upon the debtor's default.

Answer 1

True

Question 2

The deficiency judgment protects the mortgagor from being recovered further in case there is a foreclosure sale deficiency.

Answer 2

False

Question 3

Tangible personal property includes securities, patents, trademarks, and copyrights.

Answer 3

False

Question 4

Unsecured credits require collateral to protect the payment of the debt.

Question 5

A lien release discharges a material person from a mechanic's lien.

Question 6

In a mortgage transaction, the creditor is known as the mortgagee.

Question 7

An improperly recorded document is effective against either subsequent purchasers of the real property.

Question 8

The creditor who has to rely on collateral to secure payment is known as an unsecured creditor.

Question 9

The property in which the security interest is taken is called collateral.

Question 10

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

Question 11

In a secured credit, the creditor cannot recover the collateral despite the debtor's defaults on the loan.

Question 12

Attachment is a situation in which the value of the creditor's collateral is insufficient to satisfy the debt it is collated for.

Question 13

A floating lien is a security interest in property that was not in the possession of the debtor when the security agreement was executed.

Question 14

There are separate state and federal bankruptcy laws.

Question 15

Perfection of a security interest is establishes the right of a secured creditor against other creditors who claim an interest in the collateral.

Question 16

Purchase money security interest is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Question 17

Legal action cannot be bought against a debtor who is judgment proof.

Question 18

Perfection by investment of collateral is one of the methods of perfecting a security interest under the UCC.

Question 19

In a guaranty agreement, the guarantor is primarily liable on the debt.

Question 20

The surety is primarily liable for paying the principal debtor's debt when it is due in a surety arrangement.

Question 21

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

A) two-party secured
B) three-party secured
C) perfected
D) attached

Question 22

Gifts that a debtor is entitled to receive within 180 days after the petition is filed are part of the bankruptcy estate.

Question 23

A(n)________ is an instrument that gives a creditor a security interest in the debtor's real property that is pledged as collateral for a loan.

A) credit report
B) letter of credit
C) note
D) deed of trust

Question 24

An executory contract refers to a contract or lease that has not been fully performed.

Question 25

A(n)________ is an instrument that evidences a borrower's debt to the lender for a real property.

A) note
B) consignment
C) accommodation
D) deed of trust

Question 26

A(n)________ refers to a security interest in property that was not in the possession of the debtor when the security agreement was executed.

A) floating lien
B) after-acquired property
C) attachment
D) future advance

Question 27

The ________ is a statute that requires a mortgage or deed of trust to be recorded in the county recorder's office of the county in which the real property is located.

A) recording statute
B) real property statute
C) mortgage statute
D) compilation statute

Question 28

A voluntary petition is a petition filed by a creditor that states that the debtor has debts.

Question 29

A(n)________ refers to a document filed by a secured creditor with the appropriate government office that constructively notifies the world of his or her security interest in personal property.

A) security disclosure
B) financing statement
C) possession statement
D) custodial statement

Question 30

________ is a process that establishes the right of a secured creditor against other creditors who claim an interest in the collateral.

A) Disposition of collateral
B) Retention of collateral
C) Perfection of a security interest
D) Repossession of a security interest

Question 31

An arrangement where an owner of real property borrows money from a lender and pledges the real property as collateral to secure the repayment of the loan is known as ________.

A) consignment
B) foreclosure
C) mortgage
D) assignment

Question 32

________ is a situation in which a creditor agrees to extend credit only if the purchaser pledges some personal property as collateral for the loan.

A) Floating lien
B) Attachment
C) Mortgage
D) Secured credit

Question 33

When is a creditor referred to as a secured creditor?

A) when the creditor has been guaranteed payment by a trustee
B) when the creditor gives a loan without security
C) when the creditor has been paid back his debt
D) when the creditor has acquired collateral

Question 34

Liquidation is a form of bankruptcy in which the debtor's exempt property is auctioned.

Question 35

Which article of the Uniform Commercial Code governs secured transactions in personal property?

A) Article 8
B) Article 9
C) Article 18
D) Article 19

Question 36

Ashton borrows $25,000 from Amanda. Amanda lends the money to Ashton without taking an interest in collateral for the loan. Amanda is relying on Ashton's credit standing when she made the loan. What kind of creditor is Amanda?

A) unsecured creditor
B) secured creditor
C) administrative claim creditor
D) post-petition creditor

Question 37

When a creditor extends credit to a debtor and takes a security interest in some personal property of the debtor, it is called a ________.

A) super-priority lien
B) collateral claim
C) collateral disposition
D) secured transaction

Question 38

A contractor's, laborer's, and material person's statutory lien that makes the real property to which services or materials have been provided security for the payment of the services and materials is known as ________.

A) material lien
B) judgment lien
C) tax liens
D) mechanic's lien

Question 39

Under Chapter 13, a debtor retains more property than is exempt under Chapter 7 liquidation.

Question 40

To which of the following type of mortgages does the antideficiency statute apply?

A) foreign currency mortgages
B) home improvement mortgages
C) first purchase money mortgages
D) second purchase money mortgages

Question 41

________ is a rehabilitation form of bankruptcy that permits bankruptcy courts to supervise the debtor's plan for the payment of unpaid debts in installments over the plan period.

A) Chapter 7
B) Chapter 13
C) Chapter 11
D) Chapter 12

Question 42

A(n)________ provides for the reduction of a debtor's debts.

A) extension
B) liquidation
C) limitation
D) composition

Question 43

An arrangement in which a third party promises to be primarily liable with the borrower for the payment of the borrower's debt is referred to as ________.

A) garnishment
B) accommodation
C) surety arrangement
D) guaranty arrangement

Question 44

Which of the following is true of a guarantor in a guaranty arrangement?

A) The guarantor is primarily liable the principal debtor's debt when it is due.
B) The guarantor can be approached even if the principal debtor is not in default.
C) The creditor can seek first remedy from a guarantor.
D) The guarantor has full legal rights to possession of the real property in this type of arrangement.

Question 45

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

A) discharge of debt
B) composition
C) automatic stay
D) order for relief

Question 46

A(n)________ is a statutory lien given to workers on personal property to which they furnish services or materials in the ordinary course of business.

A) super-priority lien
B) floating lien
C) artisan's lien
D) judgment lien

Question 47

Which of the following has the highest priority of claim?

A) the first party to secure the interest
B) the first party to attach the interest
C) the first party to perfect the interest
D) the first party to file a financing statement

Question 48

Which of the following is true about the surety's liability to pay in a surety arrangement?

A) The surety is secondarily liable for payment.
B) The surety is primarily liable for payment.
C) The principal debtor must be in default before the surety can be approached.
D) The surety can only be approached as a last resort to the creditor.

Question 49

What is an executory contract?

A) a contract that cannot be discharged under Chapter 13
B) a contract that the debtor is obliged to perform despite filing for bankruptcy
C) an agreement between several creditors and a single debtor, dividing the debtor's property
D) a lease that has not been fully performed

Question 50

Which of the following constitutes the property of a Chapter 13 estate?

A) nonexempt property of the debtor before the case is closed
B) exempt property of the debtor before the case is closed
C) debtor's income before and after the case is closed
D) property that is exempt from Chapter 7 estate

Question 51

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash, the cash is distributed to the creditors, and any unpaid debts are discharged.

A) abusive filing
B) dissolution of debt
C) liquidation
D) reorganization

Question 52

________ is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

A) purchase money security interest
B) cumulative security interest
C) future advance monetary interest
D) default interest

Question 53

Chapter 7 of the Bankruptcy Code of the bankruptcy act of 2005 primarily deals with ________.

A) Reorganization
B) Adjustment of Debts of a Family Farmer or Fisherman with Regular Income
C) Adjustment of Debts of an Individual with Regular Income
D) Liquidation

Question 54

Which of the following bankruptcy methods allows the reorganization of the debtor's financial affairs under the supervision of the bankruptcy court?

A) Chapter 11
B) Chapter 13
C) Chapter 7
D) Chapter 12

Question 55

Which of the following does a Chapter 11 automatic stay provide?

A) automatic discharge of secured debts
B) suspension of certain legal actions against the debtor
C) creditors' foreclosure on assets given as collateral for loans
D) automatic discharge of unsecured debts

Question 56

Which of the following is true of Chapter 7 liquidation?

A) The debtor is not permitted to keep any of his or her assets.
B) The 2005 bankruptcy act has eased the process of applying for Chapter 7 bankruptcy.
C) The debtor's future income cannot be reached to pay the discharged debt.
D) Petitioning for Chapter 7 liquidation does not permit the debtor to petition for bankruptcy under any other chapter.

Question 57

What is a homestead exemption?

A) investment in realty that a debtor must forfeit
B) equity in a home that a debtor is permitted to retain
C) remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims
D) all of the debtor's assets converted to cash

Question 58

What does the Chapter 11 plan of reorganization set forth?

A) an equilateral division of the Chapter 11 estate among all creditors
B) division of the bankruptcy estate according to the debt to be paid to each creditor
C) discharge of a debtor's unsecured debts and payment of secured debts
D) a proposed new capital structure for a debtor to assume when it emerges from Chapter 11 bankruptcy

Question 59

A(n)________ is a document required to be filed by an equity security holder that states the amount of his or her interest against the debtor.

A) proof of claim
B) proof of interest
C) voluntary petition
D) involuntary petition

Question 60

Which of the following is determined by the means test?

A) The debtor's median family income is less than the state's median family income.
B) The debtor's median family income is more than the state's median family income.
C) A debtor can pay prepetition debts out of postpetition income.
D) A debtor who has sufficient disposable income to pay prepetition debts qualifies for Chapter 13 bankruptcy.

Question 61

In a(n)________ arrangement, a third party promises to be secondarily liable for the payment of another's debt.

Question 62

The lender in a credit transaction is known as the ________.

Question 63

Explain in brief the Chapter 11 plan of reorganization.

Question 64

The term ________ refers to a security interest in property that was not in the possession of the debtor when the security agreement was executed.

Question 65

The term ________ refers to a document required to be filed by a creditor that states the amount of his or her claim against the debtor.

Question 66

Explain in brief the constitution of a bankruptcy estate.

Question 67

Distinguish between secured and unsecured credit.

Question 68

________ refers to an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Question 69

If unsecured creditors do not agree to a plan of reorganization, the court can use its ________ and make the dissenting class accept the plan.

Question 70

________ is a form of credit that does not require any security to protect the payment of the debt.

Question 71

Outline the priority of claims in secured and unsecured transactions.

Question 72

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

Question 73

A(n)________ transaction occurs when a seller sells goods to a buyer who has obtained financing from a third-party lender that takes a security interest in the goods sold.

Question 74

Chapter 7 of the Bankruptcy Code deals with ________ form of bankruptcy.

Question 75

In a(n)________ arrangement, a third party promises to be primarily liable with the borrower for the payment of the borrower's debt.

Question 76

A(n)________ is the instrument that gives the creditor a security interest in the debtor's property that is pledged as collateral.

Question 77

A contract or lease that has not been fully performed is termed as a(n)________ contract.

Question 78

Distinguish between two-party and three-party secured transactions with examples.

Question 79

Chapter 11 of the Bankruptcy Code deals with ________ form of bankruptcy.

Question 80

Personal property that is subject to a security agreement is known as ________.