Deck 33: Secured Transactions in Personal Property

Question 1

Field warehousing is an example of perfection by the mere by possession of the collateral.

Answer 1

True

Question 2

Electronic chattel paper is a record of a right to payment or property that is stored in an electronic medium.

Answer 2

True

Question 3

Attachment provides creditors with rights against debtors.

Answer 3

True

Question 4

Consumer goods are classified into different categories based on the physical characteristics of the goods.

Question 5

Creditors cannot legally request collateral on a previously unsecured loan.

Question 6

A debtor must have rights in the collateral for a security interest to attach.

Question 7

A purchase money security interest in consumer goods is automatically perfected without a creditor's filing or possession of the collateral.

Question 8

Grund, a professional night club musician, financed the purchase of a drum set to be used in his night club act. Under Article 9, the drum set will be classified as a consumer good.

Question 9

Claim in a changing or shifting stock of the buyer's goods is known as after-acquired goods.

Question 10

Property that is subject to a security interest is called collateral.

Question 11

When a consumer gives a creditor a security interest in forthcoming health insurance proceeds, the creditor must file a statement with the insurance company in order to have a perfected security interest.

Question 12

A security agreement must be backed by a written record even if the creditor has possession of the collateral.

Question 13

A creditor must file a financing statement for a security interest to attach.

Question 14

Secured transactions are governed by Article 2 of the Uniform Commercial Code.

Question 15

Collateral may change its form and character during the course of a security agreement.

Question 16

In a secured transaction, the person to whom the money is owed is secured party and the buyer is the debtor.

Question 17

A security interest is like a lien on personal property that allows the creditor to take possession of the property if the debtor defaults.

Question 18

An after-acquired property clause in a consumer security agreement means that a creditor has a lien in the shifting stock of goods of the debtor.

Question 19

A security interest needs to be perfected, regardless of whether there are competing claims for the collateral.

Question 20

Security agreements allow for "blanket" descriptions of collateral that do not provide specific details on the specific type of collateral involved.

Question 21

A debtor may redeem collateral from the secured party at any time prior to sale or disposal by paying all legal costs and expenses incurred by the secured party.

Question 22

Unsecured creditors have equal priority and stand behind secured creditors for repayment of their debts.

Question 23

The concept of perfection: ______.:

A) creates a security interest.
B) protects against the claims of others to the collateral.
C) secures the rights of the creditor against the debtor.
D) Converts unsecured creditors into secured creditors.

Question 24

All of the following are elements of a security agreement except: ______.

A) identification of the parties involved.
B) a reasonable description of the collateral.
C) demonstration that the parties intended for the creditor intends to have a security interest.
D) statement of the amount of the debt.

Question 25

Javier buys a 3D TV and a DVR from West Coast Sales. West Coast agrees to lend him 90 percent of the purchase price. Their agreement is known as a(n): ______.

A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) transferred collateral interest.

Question 26

Suzy wants to borrow cash from Bruce. She offers him a security interest in her neighbor's diamond ring, which she has been told that she or her sister will receive after their neighbor passes away. Regarding Suzy's proposal, which of the following statements is true?

A) Bruce cannot take a security interest in the ring, because Suzy does not have rights to the collateral.
B) Bruce must have the ring in his possession or have a written agreement from Suzy describing the ring in order to obtain a security interest in it.
C) Suzy must not have legal rights to the ring if she is going to give Bruce a security interest.
D) Suzy must not give Bruce something of value as a security interest.

Question 27

Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral.

Question 28

Because the financing statement is intended as notice to third parties, it must be filed in a public place.

Question 29

_______, a form of possession under Article 9, occurs when a bank is able to require the debtor account holder to clear all transactions in that account.

A) Control
B) Perfection.
C) Termination
D) Redemption

Question 30

A(n) ______security interest is effective against third persons as well as against the buyer.

A) universal.
B) prohibitive.
C) perfected.
D) protective.

Question 31

An interest in personal property or fixtures that secures payment or performance of an obligation is called a(n): ______.

A) guaranty holding.
B) security interest.
C) guaranty interest.
D) good-faith guaranty.

Question 32

Suppose Harvey is a secured creditor and Joe is the debtor. If Harvey sells the collateral because Joe defaulted, Joe is not liable for any deficiency.

Question 33

All of the following are elements of attachment except: ______.

A) the filing of a financing statement
B) a security agreement
C) value received by the debtor
D) the debtor has rights in the collateral

Question 34

Under Revised UCC Article 9, a debtor may authorize a financing statement by acquiring the collateral that is subject to the security agreement.

Question 35

Generally, a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.

Question 36

If the collateral is in the possession of the creditor: ______.

A) a financing statement must be filed to perfect the interest.
B) the security interest is perfected.
C) only a security interest has been obtained.
D) the type of goods will determine the method of perfection.

Question 37

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

Question 38

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

Question 39

If two creditors have a security interest in the same collateral, their priority is determined according to the "last in-first out" provision.

Question 40

Whatever is received upon the sale, exchange, collection or other disposition of collateral is known as: ______.

A) goods.
B) paper.
C) proceeds.
D) security interest.

Question 41

In most states, __________ provides that a security interest in a non-inventory motor vehicle must be noted on the vehicle title registration.

A) a non-Code statute
B) UCC Article 2
C) UCC Article 9
D) judicial precedent

Question 42

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.

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

Question 43

When there are two perfected secured creditors in the same collateral: ______.

A) priority goes to the creditor who perfected first.
B) priority goes to the creditor who is owed the greatest amount of money.
C) each perfected secured creditor has a 50% interest in the collateral.
D) both perfected secured creditors are treated like unsecured creditors in regards to the collateral.

Question 44

The perfection obtained by filing a financing statement lasts for __________.

A) five (5) years, and is renewable.
B) five (5) years, and is non-renewable.
C) ten (10) years, and is renewable.
D) ten (10) years, and is non-renewable.

Question 45

Morris made two purchases. He purchased his neighbor Cordelia's typewriter and a computer from Crazy Computers. Regarding the typewriter, Cordelia had bought it on credit from Jack's Typewriters. Cordelia had financed the purchase with Jack's and signed a promissory note and a security agreement covering the purchase. The creditor, Jack's, did not file a financing statement, relying on the concept of automatic perfection for purchase money security interests in consumer goods. Morris was unaware of the history of the typewriter. The computer was subject to a security interest in favor of Country Bank, which had perfected its security interest by filing. Morris, by coincidence, knew of this security interest when Morris purchased the computer. Unfortunately, neither Cordelia nor Crazy Computers paid the secured creditors who now seek to repossess the collateral from Morris. What will be the likely outcome of this case?

Question 46

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.

Question 47

What is the purpose of a financing statement?

A) to meet UCC accounting requirements under Article 9
B) to create a security interest
C) to amend a security agreement
D) to alert third persons that a creditor has a security interest in the collateral described

Question 48

Upon a default by a buyer, the secured seller may resell the collateral:

A) not less than three (3) months after the buyer's default.
B) not less than six (6) months after the buyer's default.
C) only at a public sale.
D) at either a public or a private sale.

Question 49

A financing statement must provide all of the following except: _______.

A) the name of the debtor.
B) the name of the secured party or their representative.
C) the covered collateral.
D) the value of the collateral.

Question 50

When the filing of a financing statement is defective: ______.

A) the security interest is lost.
B) the filing fails to perfect the security interest.
C) the security interest is perfected through the court's application of equitable principles.
D) the public notice of the creditor's interest is still effective.

Question 51

If a breach of the peace might occur:

A) self-help repossession is the only option available to obtain the collateral.
B) the creditor must use court action to obtain the collateral.
C) the creditor is barred from repossessing the collateral.
D) the collateral reverts to the debtor.

Question 52

Mark purchased a very expensive automobile on credit. Within a week, Mark discovered that a tune-up was necessary, for he was in the habit of driving at an excessive rate of speed. When the car was repaired, the bill was more than $1,000. Mark does not have the money to pay for the car repairs or the monthly car payments. The credit company as well as the repair shop are concerned over who has priority of repayment. Who has priority and why?

Question 53

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:

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.