Deck 33: Creditors Rights and Remedies

Question 1

A contract of suretyship does not necessarily have to be in writing to be enforceable.

Answer 1

False

Question 2

A creditor's composition agreement may be entirely enforceable.

Answer 2

True

Question 3

An artisan's lien is a security device created at statutory law through which a creditor can recover payment for labor and materials used to increase the value of real property.

Answer 3

False

Question 4

To use attachment as a remedy,a creditor must have an enforceable right to payment of the debt.

Question 5

A writ of attachment is a court order to seize a debtor's property after the entry of a final judgment in a creditor's lawsuit against the debtor.

Question 6

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

Question 7

All of a debtor's pay can be gar?nished.

Question 8

A mechanic's lien can be enforced to obtain payment for work that adds value to real property.

Question 9

An employer can refuse to turn over a debtor's wages.

Question 10

Creditors can agree with a debtor to discharge the debtor's debts on payment of a sum less than that owed.

Question 11

Liquidated debts are debts that are indefinite,or not fixed,in amount.

Question 12

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

Question 13

An artisan's lien is effective only if a creditor has possession of the property.

Question 14

Once a writ of execution has been issued,the debtor cannot pay the judgment and redeem the property,even if the sale has not taken place.

Question 15

Liens usually do NOT take priority over other claims against the same property.

Question 16

A writ of execution is a writ that puts in force a court decree or judgment.

Question 17

A lien is an encumbrance on property to satisfy a debt or protect a claim for the payment of a debt.

Question 18

An employee cannot be discharged due to a garnishment order.

Question 19

A mechanic's lien is possessory.

Question 20

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

Question 21

A homestead exemption allows a debtor to pay less for a home than was actually owed.

Question 22

Michael performs a contract with Jill to fix the brakes on her car.Jill leaves her car with Michael,but then she refuses to pay Michael after he completes the work.Michael tells Jill that he will not return her car until she pays.Michael's lien on Jill's car will end

A)in 30 days.
B)in 60 days.
C)when Michael voluntarily surrenders possession of the car.
D)when Jill obtains a court order requiring Michael to return the car.

Question 23

Portia owes Bon $500 on their contract,but refuses to pay.To collect,Bon files a me?chanic's lien,under which security for the debt is repre?sented by

A)Portia's personal property.
B)Portia's real estate.
C)the $500 owed under the contract.
D)the contract.

Question 24

Certain types of property are exempt from writs of execution or attachment.

Question 25

A surety is secondarily liable on an obliga?tion.

Question 26

Pruit performs a contract with Quint to reshingle the roof on Quint's house,but Quint does not pay.Pruit notifies Quint that Pruit will foreclose on the house and sell it to satisfy the debt.This is

A)a judicial lien.
B)a mechanic's lien.
C)an artisan's lien.
D)a violation of most state laws.

Question 27

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

Question 28

A guaranty contract must be in writing to be enforceable,unless the main purpose exception applies.

Question 29

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

Question 30

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

A)a judicial lien.
B)a mechanic's lien.
C)an artisan's lien.
D)a violation of most states' laws.

Question 31

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

Question 32

Ginny brings her bicycle to Jackson for repairs.After Jackson completes the repairs,Ginny refuses to pay him.Which of the following conditions is NOT necessary for Jackson to have an artisan's lien on Ginny's bicycle?

A)Jackson must have retained possession of the bicycle.
B)Jackson must have agreed to provide his repair services on a cash basis.
C)Jackson must have agreed to provide his repair services on a credit basis.
D)Jackson must not have agreed to provide his repair services on a credit basis.

Question 33

A creditor can demand payment from the surety BEFORE the debt is due.

Question 34

Vehi?cles are usually included in state exemption statutes.

Question 35

A surety can assert the debtor's bankruptcy as a defense.

Question 36

Clothing is not included in state exemption statutes.

Question 37

A surety can never assert fraud as a defense.

Question 38

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.

Question 39

A guarantor is secondarily liable on an obliga?tion.

Question 40

A material change in a loan contract between a creditor and a debtor dis?charges a surety only to the extent that the surety suffers a loss.

Question 41

Fact Pattern 33-2 (Questions 18-19 apply)
Amy signs a lease on behalf of Business Start-up,Inc.(BSI),with Cool Properties,Inc.As part of the lease,Amy signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 33-2.If BSI stops paying the rent,li?ability for the un?paid rent will be assessed against

A)Amy and BSI.
B)BSI only.
C)Cool only.
D)no one.

Question 42

A court awards a judgment to Alice,who is the creditor,against Ada,who is the debtor.After the judgment,Alice requests a court order to seize Ada's property to ensure that the judgment will be collectible.This is

A)a judicial lien.
B)a writ of attachment.
C)a writ of execution.
D)a violation of most state laws.

Question 43

Jay is a surety for Karen's loan from Little Bank.Jay's right to be reim?bursed by Karen after having paid her debt is the right of

A)contribution.
B)redemption.
C)reimbursement.
D)subrogation.

Question 44

Khali's debt to Lew is past due.Lew obtains a judgment against Khali to collect the debt,but Khali refuses to pay.Lew asks the court to order Khali's employer to pay a portion of Khali's paycheck to Lew.This is a request for

A)an exemption from most federal limits on creditors' actions.
B)an order of garnishment.
C)an order that would violate most state laws.
D)a right of contribution.

Question 45

Fact Pattern 33-1 (Questions 14-15 apply)
Alpha Corporation needs to borrow money to meet its payroll.Blair,Alpha's owner,asks City Bank to loan Alpha the funds.
Refer to Fact Pattern 33-1. If City Bank insists that Blair sign the loan ap?plica?tion to assume liability for payment whether or not Alpha defaults,Blair will be

A)not truly liable because she signed only at City Bank's insistence.
B)primarily liable.
C)secondarily liable.
D)tertiarily liable.

Question 46

Ross and Sally agree to guarantee Tim's debt.Ross's maximum liabil?ity is $30,000,and Sally's is $20,000.Tim owes $20,000 and is in default.Ross pays the creditor the entire amount.In the ab?sence of an agree?ment to the contrary,Ross can recover from Sally

A)$8,000.
B)$10,000.
C)$20,000.
D)nothing.

Question 47

Jared is a surety for Alfred's loan from Hometown Bank.Alfred defaults on his loan.As a surety,Jared can

A)assert Alfred's bankruptcy,but not the statute of limitations as a defense to avoid liability.
B)assert the statute of limitations,but not Alfred's bankruptcy as a defense to avoid liability.
C)assert neither the statute of limitations nor Alfred's bankruptcy as a defense to avoid liability.
D)assert either Alfred's bankruptcy or the statute of limitations as a defense to avoid liability.

Question 48

Friendly Credit Corporation (FCC) believes that Gary may dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment.FCC may ask a court to issue a writ of

A)attachment.
B)contribution.
C)execution.
D)redemption.

Question 49

Fact Pattern 33-2 (Questions 18-19 apply)
Amy signs a lease on behalf of Business Start-up,Inc.(BSI),with Cool Properties,Inc.As part of the lease,Amy signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 33-2.Amy will be held liable for unpaid rent because:

A)Amy signed the lease "on BSI's behalf."
B)Amy signed a "GUARANTY."
C)Cool leases the property to different tenants at different times.
D)Cool wrongly insisted that Amy sign an alleged "GUARANTY."

Question 50

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors.If,after the loan agreement is signed,Dina agrees to a higher rate of interest without telling Edie,then Edie is

A)discharged from the agreement.
B)liable at the higher rate of interest.
C)liable at the lower rate of interest.
D)liable for the principal only.

Question 51

Ronald's debt to Greg is past due.Ronald obtains a judgment against Larry to collect the debt,but Larry will not pay.Ronald requests a writ of execution.The property that is seized under the writ of execution must be

A)worth more than Larry's debt to Ronald.
B)worth less than Larry's debt to Ronald.
C)intangible.
D)located within the court's geographical jurisdiction.

Question 52

Donald's debt to Everett is past due.Everett brings a legal action against Donald to collect the debt.To ensure that a judgment in Everett's favor will be collectible,Everett asks the court to order the seizure of Donald's property.This is a request for

A)a guaranty (or suretyship) contract.
B)an order that would violate most state laws.
C)a writ of attachment.
D)a writ of execution.

Question 53

Kwik Delivery Company buys a truck from Lucky Vehicles,Inc.,under a contract signed by Mina,Kwik's president,making her personally liable if Kwik does not pay the loan.Mina is

A)a guarantor.
B)a surety.
C)a co-surety.
D)a co-creditor.

Question 54

Julia owes Ryan $10,000.When the debt comes due,Julia refuses to pay.Ryan obtains a judgment against Julia to collect the debt,but she still refuses to pay.Using a writ of execution,the court orders the sheriff to seize Julia's motor boat and sell it to pay the debt.The boat sells for $15,000.Ryan

A)will receive $15,000 and Julia will receive nothing.
B)will receive $10,000 and Julia will receive $5,000.
C)will receive $7,500 and Julia will receive $7,500.
D)will receive $10,000 and the court will receive $5,000.

Question 55

Elvin fraudulently induces Frank,a consumer,to sign a promissory note to buy a speedboat.Elvin sells the note to Gaston,who takes it for value,in good faith,and without knowledge of the fraud.With respect to the defense against payment on the note to Elvin,Frank can

A)assert this defense against Gaston.
B)file for a property exemption.
C)exercise the right of subrogation.
D)obtain a deficiency judgment.

Question 56

Maggie is a surety for Juli's debt to Bill.Bill and Juli decide to make material changes to the original contract without consulting Maggie.Maggie is

A)still bound by the contract.
B)discharged completely.
C)still bound by the contract,but allowed to make additional changes to the contract.
D)still bound by the contract unless she contests it within 30 days of the changes.

Question 57

Fact Pattern 33-1 (Questions 14-15 apply)
Alpha Corporation needs to borrow money to meet its payroll.Blair,Alpha's owner,asks City Bank to loan Alpha the funds.
Refer to Fact Pattern 33-1.If City Bank insists that Blair sign the loan ap?plica?tion to assume liability for payment only if Alpha defaults,Blair will be

A)not truly liable because she signed only at City Bank's insistence.
B)primarily liable.
C)secondarily liable.
D)tertiarily liable.

Question 58

Mike owes $12,000 to Nora,$6,000 to Owen,and $6,000 to Pat.The three creditors enter into an agreement with Mike to discharge the debts on payment of a sum of $12,000 to them,to be divided proportionately.This is

A)a creditors' composition agreement.
B)a guaranty agreement.
C)a judicial lien.
D)a suretyship agreement.

Question 59

William is a surety for Jeannie's loan from Richard.Richard knows of William's existence.When the loan comes due,Jeannie tries to pay Richard,but Richard rejects the payment.William is

A)released from any obligation on the debt.
B)required to pay the amount of the debt to Richard.
C)required to pay up to half of the amount of the debt to Richard.
D)required to pay the amount of the debt to Jeannie.

Question 60

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

A)be unable to collect the amount of a judgment against Larry.
B)be unable to redeem Larry's exempt property before a sale will occur.
C)notify Larry in writing (in a "writ") of her intent.
D)obtain and maintain possession of Larry's property.

Question 61

Rob is a surety for Sue's loan from Total Finance Company.Rob's right to "step into the shoes" of Total Finance,after paying Sue's debt,and exer?cise any of the Total Finance's rights against Sue is the right of

A)contribution.
B)redemption.
C)reimbursement.
D)subrogation.

Question 62

Consumer Credit,Inc.(CCI),lends $1,000 to Joe. Kay acts as Joe's surety. If Kay pays the loan,she gets

A)any right that CCI had against Joe,but not a right to be repaid by Joe.
B)a right to be repaid by Joe,but not any right that CCI had against Joe.
C)any right that CCI had against Joe and a right to be repaid by Joe.
D)none of the choices.

Question 63

Fact Pattern 33-3 (Questions 32-35 apply)
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 33-3.Other property Mary may own that may be ex?empt from satisfaction of judgment debts includes

A)any property that Mary wishes to exempt.
B)investments that Mary has made in her family's businesses.
C)recreational vehicles that Mary uses on weekends.
D)tools that Mary uses in her trade.

Question 64

Dina,Ed,and Fran are co-sureties of Glen's debt to Hi-Credit Company.Dina pays Glen's entire debt.Dina's right to seek proportionate pay?ments from Ed and Fran is the right of

A)contribution.
B)redemption.
C)reimbursement.
D)subrogation.

Question 65

A pipe in Gert's house springs a leak.Gert contracts with Holly's Plumbing & Construction Company to repair the pipe and fix the dam?age to Gert's house.Gert pays 10 percent of the price in advance.Holly's does the work,but Gert refuses to pay the rest of the price.What can Holly's do,and how is it done?

Question 66

Daphne defaults on a debt to Country Loan Corporation (CLC).As a creditor,CLC can place liens on all of Daphne's property except

A)motor vehicles used to commute to work.
B)stock in various corporations.
C)items that the debtor selects.
D)vacant commercial property.

Question 67

Fact Pattern 33-3 (Questions 32-35 apply)
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 33-3.If Nina recovers less than she is owed,she can realize the difference from

A)any property that Mary owns.
B)only exempt property that Mary owns.
C)only nonexempt property that Mary owns.
D)property that any other member of Mary's family owns.

Question 68

Drew and Earl are brothers.They agree to act as guarantors on a loan made by their sister,Flo.Flo defaults on the payments and Drew re?fuses to pay.Earl pays the debt.Earl can recover from

A)Drew and Flo under the right of proportionate liability.
B)Drew and Flo under the right of reimbursement.
C)Drew under the right of contribution and Flo under the right of subrogation.
D)no one,because the parties are brothers and sister.

Question 69

Fact Pattern 33-3 (Questions 32-35 apply)
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 33-3.Mary will receive

A)$0.
B)$30,000.
C)$50,000.
D)$60,000.

Question 70

Fact Pattern 33-3 (Questions 32-35 apply)
Mary's home is in a state that has a $30,000 homestead exemption.Mary de?faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 33-3.Nina may recover

A)$0.
B)$30,000.
C)$50,000.
D)$60,000.

Question 71

Smartt Software Company borrows $10,000 from Term 'N All Loans,Inc.,but cannot repay the loan when it comes due.Term 'N All refuses to ex?tend the time for repayment unless Smartt can provide an acceptable surety.Uno Venture Corporation agrees to act as a surety for the loan af?ter Smartt offers the firm a discount on software and shows Uno financial statements,compiled with Term 'N All's assistance,that misrepresent Smartt's financial situation.Later,after Uno uses the discount to buy software,Smartt again defaults on repayment of the loan,and Term 'N All files a suit against Uno to collect the amount of the debt.Is Uno liable? Why or why not?

Question 72

Dana defaults on a debt to Rachel.Rachel will NOT be able to recover the debt from

A)the sale of Dana's prize winning pet dog.
B)the sale of Dana's investments in stocks.
C)Dana's wages.
D)Dana's lottery winnings.