Deck 18: Holder in Due Course, Liability, and Defenses

Question 1

The "bankruptcy estate" consists of the debtor's debts.

Answer 1

False
Explanation: The debtor's prepetition assets form the bankruptcy estate.

Question 2

A _____________ is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.

A) Approved transfer.
B) Approved guarantee.
C) Secured transaction.
D) Effected transaction.
E) Guaranteed debt.

Answer 2

C
Explanation: A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.

Question 3

Which of the following articles of the UCC govern secured transactions and personal property?

A) Article 1.
B) Article 4.
C) Article 5.
D) Article 7.
E) Article 9.

Answer 3

E
Explanation: Article 9 of the Uniform Commercial Code (UCC) governs secured transactions in personal property (as opposed to real property).

Question 4

According to the UCC, value is consideration.

Question 5

Under Chapter 7, liquidation may be voluntary but not involuntary.

Question 6

Assets that a debtor gains after filing a Chapter 7 bankruptcy petition are generally not part of the bankruptcy estate unless they fall under an exemption.

Question 7

Which of the following is the person or party that holds the interest in the secured property?

A) A debtor.
B) A transaction party.
C) An approved party.
D) A secured party.
E) An attached party.

Question 8

Chapter 11 reorganization may be involuntary but not voluntary.

Question 9

A security interest may not apply to personal property that is not yet in the debtor's possession.

Question 10

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 included only minor changes to bankruptcy law.

Question 11

Before a debtor files for one specific type of bankruptcy relief, the clerk of courts must give the debtor written notice of the other types of relief available.

Question 12

When perfection by possession occurs, the parties do not have to create a written security agreement.

Question 13

If a buyer purchases chattel paper in the ordinary course of business and is unaware of any applicable security interest, the buyer can obtain the good free of any security interest.

Question 14

Under the UCC, a buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods even if the security interest is perfected.

Question 15

The person who fails to make payments as scheduled is said to have defaulted on a loan.

Question 16

Which of the following is an interest in personal property or fixtures which secures payment or performance of an obligation?

A) An approved interest.
B) A secured interest.
C) A secured transaction.
D) A debt transaction.
E) A security agreement.

Question 17

Perfection of a security interest in a motor vehicle generally occurs when the secured party files the interest with the state's Department of Motor Vehicles.

Question 18

In a Chapter 7 proceeding, a bankruptcy trustee may at times temporarily take over a debtor's business.

Question 19

Collateral is the property that is subject to a security interest.

Question 20

If a debtor fails to appear at the Chapter 7 creditors' meeting, the court may refuse to grant the bankruptcy.

Question 21

Once a financing statement has been filed with a correct agency, for how long is the statement valid under the UCC without renewal?

A) 1 year.
B) 2 years.
C) 3 years.
D) 5 years.
E) 10 years.

Question 22

When _____________ occurs, the creditor becomes the secured party who has a security interest in the collateral.

A) Attachment.
B) Transformation.
C) Reaffirmation.
D) Security.
E) Perfection.

Question 23

According to the UCC, which of the following should a financing statement list?

A) The names and addresses of all parties involved only.
B) The names and addresses of all the parties involved and a description of the collateral only.
C) The names and addresses of all the parties involved, a description of the collateral, and the signature of the debtor.
D) The name of the financing bank and the name of the debtor, and a description of the collateral.
E) The name of the financing bank, the signature of the debtor, a description of the collateral, and details of the loan repayment schedule.

Question 24

Which of the following is an example of an intangible[s]?

A) Accounts.
B) Goodwill.
C) Literary rights.
D) Accounts, goodwill, and literary rights.
E) Accounts and goodwill, but not literary rights.

Question 25

A _____________ is a person or party that has an obligation to the secured party.

A) A creditor.
B) A debtor.
C) A secured creditor.
D) A secured debtor.
E) A transaction debtor.

Question 26

Transfer of collateral to a secured party for the purpose of perfection is called a[n] _____________.

A) Allegiant.
B) Pledge.
C) Transfer.
D) Allonge.
E) Release.

Question 27

Which of the following is the designation for property acquired by the debtor after a security agreement covering the property is made?

A) Post-dated property.
B) After-acquired property.
C) Proceeds.
D) Post-acquired property.
E) Subsequently acquired property.

Question 28

Which of the following is formed when a debtor uses borrowed money from the secured party to buy the collateral?

A) A secured possessory interest.
B) A loaned money possessory interest.
C) A purchase-money security interest.
D) A purchase-cash consumer interest.
E) A perfected security interest.

Question 29

Which of the following is true under the UCC regarding a security interest in collateral that has been perfected in one state when the collateral is moved to another state?

A) A security interest in collateral that has been perfected in one state will generally expire immediately when the collateral is moved to another state.
B) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of four months from the date that the property is brought into the other state.
C) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of six months from the date that the property is brought into the other state.
D) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of two months from the date that the property is brought into the other state.
E) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of 30 days from the date that the property is brought into the other state.

Question 30

Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts returned through the same collateral?

A) Perfection.
B) Filing.
C) Noticing.
D) Financing noticing.
E) Arrangement.

Question 31

Which of the following are examples of goods?

A) Consumer goods.
B) Farm products.
C) Documents of title.
D) Consumer goods, farm products, and documents of title.
E) Consumer goods and farm products, but not documents of title.

Question 32

When a debtor sells collateral, he or she receives _____________, something that is exchanged for collateral.

A) After-acquired property.
B) Subsequent-acquired property.
C) Proceeds.
D) Collateral.
E) Post-financed funds.

Question 33

Which of the following types of collateral must be perfected through possession?

A) Certificates of deposit.
B) Stocks.
C) Bonds.
D) Certificates of deposit, stocks, and bonds.
E) There are no types of collateral that must be perfected through possession.

Question 34

Under the UCC, a secured party's interest in proceeds lasts for _____________ after the debtor receives the proceeds.

A) 30 Days.
B) 60 Days.
C) 1 Year.
D) 5 Days.
E) 10 Days.

Question 35

Which of the following can be considered after-acquired property?

A) Inventory.
B) Livestock.
C) Equipment.
D) Inventory, livestock, and equipment.
E) Inventory and equipment, but not livestock.

Question 36

Which of the following is true regarding a secured party's interest in proceeds?

A) A secured party automatically has an interest in proceeds for a limited amount of time.
B) A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party.
C) A secured party has an interest in proceeds only if a financing statement is filed on the proceeds.
D) A secured party has an interest in proceeds if the secured party takes the proceeds into the possession of the secured party or if the secured party files a financing statement on the proceeds.
E) The secured party may not acquire a security interest in proceeds unless a new agreement regarding the proceeds is reached with the debtor.

Question 37

Which of the following are examples of collateral?

A) Goods.
B) Indispensable paper.
C) Intangibles.
D) Goods, indispensable paper, and intangibles.
E) Goods and indispensable paper, but not intangibles.

Question 38

Which of the following is an example of indispensable paper?

A) Fixtures.
B) Documents of title.
C) Accounts.
D) Fixtures, documents of title, and accounts.
E) Fixtures and documents of title, but not accounts.

Question 39

Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

A) A retail good.
B) A consumer good.
C) A pledged good.
D) A financed good.
E) An approved good.

Question 40

Which of the following is the agreement by which the debtor gives the secured interest to the secured party?

A) Collateral agreement.
B) Secured interest.
C) Debtor agreement.
D) Secured transaction.
E) Security agreement.

Question 41

Which of the following is true regarding the UCC's definition of default?

A) The UCC defines default as failure to make any payment when due.
B) The UCC defines default as failure to make a payment within 30 days after a payment is due.
C) The UCC defines default as failure to make a payment within 60 days after a payment is due.
D) The UCC defines default as failure to make a payment within 90 days after a payment is due.
E) None of these because the UCC does not define default.

Question 42

Which of the following is an amendment to a financing statement that states that the debtor has no obligation to the secured party?

A) An ending statement.
B) A termination statement.
C) A bind-up statement.
D) A release statement.
E) A reversion statement.

Question 43

Which of the following is an individual who takes over administration of the debtor's estate?

A) Administrator
B) Aligner
C) Organizer
D) Reformer
E) Trustee

Question 44

Which of the following titles of the United States Code contains the Bankruptcy Code?

A) Title 9
B) Title 11
C) Title 7
D) Title 15
E) Title 34

Question 45

Which of the following are ineligible for Chapter 7 relief in bankruptcy?

A) Banks.
B) Railroads.
C) Health maintenance organizations.
D) Banks, railroads, and health maintenance organizations.
E) Banks and railroads, but not health maintenance organizations.

Question 46

Which of the following chapters of the Bankruptcy Code is used for a sale of a debtor's assets by a trustee and the distribution of money to creditors?

A) Chapter 7
B) Chapter 9
C) Chapter 11
D) Chapter 13
E) Chapter 15

Question 47

Which of the following occurs when a debtor turns over all assets to a trustee?

A) Liquidation
B) Reorganization
C) Reformation
D) Acknowledgment
E) Avoidance

Question 48

Which of the following is a term used in bankruptcy for debtors who cannot pay their debts in a timely fashion?

A) Statutory debtors
B) Insolvent debtors
C) Owers
D) Transactors
E) Acknowledged transactors

Question 49

Which of the following is true under the UCC if a buyer of a consumer good subject to purchase-money security interest later sells the good?

A) The security interest immediately terminates.
B) The security interest passes to the new buyer.
C) Regardless of whether the buyer is aware of the security interest, the security interest terminates if the sale to the new buyer is made before the original secured party files a financial statement.
D) As long as the buyer is not aware of the security interest, purchases the good for his or her personal use, and purchases the good before the secured party files a financial statement, the new buyer obtains the good free of the security interest.
E) As long as the buyer is not aware of the security interest, purchases the good for resale, and purchases the good before the secured party files a financial statement, the buyer obtains the good free of the security interest.

Question 50

Which of the following may a buyer purchase in the ordinary course of business and obtain the goods free of any security interest so long as the buyer is unaware of any security interest in the good?

A) Chattel paper.
B) An instrument.
C) An authorization.
D) Chattel paper, instruments, and authorizations.
E) Chattel paper and instruments, but not authorizations.

Question 51

Which of the following is a person who routinely buys goods in good faith from a person who routinely sells these goods?

A) A buyer in the typical course of business.
B) An approved buyer.
C) An approved buyer in the ordinary course of business.
D) A buyer in the ordinary course of business.
E) An exchanger in the typical course of business.

Question 52

Assuming a purchase-money security interest is not involved, which of the following is true regarding priority when there are two secured parties and neither has perfected?

A) The party who attached its interest first will prevail.
B) The party who attached its interest second will prevail.
C) The parties will divide the proceeds evenly between them.
D) The party who loaned the most money on the collateral has priority.
E) The party who loaned the least amount on the collateral has priority.

Question 53

Which of the following is called straight bankruptcy?

A) Liquidation
B) Reorganization
C) Reformation
D) Acknowledgment
E) Avoidance

Question 54

In which of the following did Congress make comprehensive changes to bankruptcy law?

A) The Bankruptcy Amendments of 2005
B) The Bankruptcy Fraud Protection Act of 2007
C) The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
D) The Bankruptcy Fraud and Consumer Shield Act of 2006
E) The Insolvency Protection Amendments of 2006

Question 55

Which of the following chapters of the Bankruptcy Code recognizes insolvency proceedings pending in a foreign country and relief for foreign debtors?

A) Chapter 7
B) Chapter 9
C) Chapter 11
D) Chapter 14
E) Chapter 15

Question 56

Which of the following is a writing that indicates both a monetary obligation and a security interest in specific goods?

A) Chattel paper.
B) Combined paper.
C) Transactional paper.
D) Monetary and secured paper.
E) Specific interest paper.

Question 57

Which of the following is a writing that demonstrates a right to payment of money?

A) Chattel paper.
B) Goods paper.
C) Payment paper.
D) An instrument.
E) An authorization.

Question 58

Which of the following is false regarding provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?

A) Under the Act, an individual may not generally be considered a debtor unless within 180 days prior to filing, the debtor receives credit counseling from a nonprofit budget and credit counseling agency.
B) Under the Act, if an individual was a debtor in a bankruptcy case that was dismissed within 180 days of the current case, the individual is generally not eligible to be a debtor under Chapters 7, 11, or 13.
C) Under the Act, if a previous bankruptcy was completed rather than dismissed, the individual is generally permitted to file for bankruptcy again.
D) Under the Act if a party completes a Chapter 7 bankruptcy, the party is not permitted to seek a Chapter 7 bankruptcy again for eight years.
E) Under the Act if a party has at least $10,000 in assets, the party may not file for any type of bankruptcy protection.

Question 59

Which of the following is true regarding the manner in which a secured party may sell collateral?

A) The sale must be in a private sale.
B) The sale must be in a public sale.
C) The sale must be in an acknowledged sale.
D) The sale may be in a private sale, public sale, or an acknowledged sale.
E) The sale may be in either a private sale or a public sale.

Question 60

Which of the following chapters of the Bankruptcy Code is used as a reorganization of the debtor's financial affairs under supervision of the bankruptcy court?

A) Chapter 7
B) Chapter 9
C) Chapter 11
D) Chapter 14
E) Chapter 15

Question 61

By filing a[n] _____________ petition under Chapter 7, creditors can attempt to force a debtor who is not paying debts as they become due into bankruptcy.

A) Voluntary
B) Involuntary
C) Complaint
D) Accusatory
E) Dispute

Question 62

Which of the following means that bankruptcy relief is ordered and that the bankruptcy proceedings can continue?

A) An order of relief
B) A stay enforcement order
C) An approval order
D) A liquidation order
E) None of these because if bankruptcy relief is ordered, all collection efforts must cease.

Question 63

Who calls the creditors' meeting in a Chapter 7 proceeding?

A) The trustee
B) The interim trustee
C) The bankruptcy judge
D) The district court judge
E) At least three of the creditors

Question 64

Under which of the following may a court presume that an individual is abusing the bankruptcy provisions of Chapter 7 when an individual's debt is primarily consumer debt and the individual's income is above the median income in his or her state?

A) The means test
B) The assets test
C) The median test
D) The liquidation test
E) The bankruptcy test

Question 65

Which of the following is an agreement by which the debtor agrees to pay a debt even though it could be discharged?

A) A settlement
B) A reaffirmation agreement
C) An acknowledgement agreement
D) An accord and compromise
E) An affirmance

Question 66

Which of the following is true regarding rights of a trustee in a Chapter 7 bankruptcy?

A) The trustee takes possession of the debtor's property and has it appraised.
B) If someone else holds the debtor's property, the trustee has the power to require the person to return that property.
C) The trustee may temporarily take over the debtor's business.
D) The trustee takes possession of the debtor's property and has it appraised; if someone else holds the debtor's property, the trustee has the power to require the person to return that property; and the trustee may temporarily take over the debtor's business.
E) The trustee takes possession of the debtor's property and has it appraised; and if someone else holds the debtor's property, the trustee has the power to require the person to return that property; but the trustee may not take over the debtor's business even temporarily.

Question 67

Which of the following is true regarding the number of creditors who must vote to accept a reorganization plan under a Chapter 11 proceeding?

A) For the plan to be accepted, one-third of the creditors of each class of creditors must vote to approve it.
B) For the plan to be accepted, one-half of the creditors of each class of creditors must vote to approve it.
C) For the plan to be accepted, two-thirds of the creditors of each class of creditors must vote to approve it.
D) For the plan to be accepted, three-fourth of the creditors of each class of creditors must vote to approve it.
E) For the plan to be accepted, one-fourth of the creditors of each class of creditors must vote to approve it.

Question 68

Which of the following is a meeting of all creditors listed in the Chapter 7 required schedules for liquidation?

A) A debt meeting
B) A control meeting
C) A creditors' meeting
D) An enforcement meeting
E) A counseling meeting

Question 69

Once a voluntary liquidation proceeding under Chapter 7 is filed, the debtor's prepetition assets form the _____________.

A) Corpus
B) Remainder
C) Residual estate
D) Bankruptcy estate
E) Relinquished asset pool

Question 70

Which of the following cannot be forced into involuntary bankruptcy under Chapter 7?

A) Farmers
B) Ranchers
C) Nonprofit organizations
D) Farmers, ranchers, and nonprofit organizations
E) Farmers and ranchers, but nonprofit organizations may be forced into involuntary bankruptcy

Question 71

Which of the following provides for adjustment of debts of family farmers?

A) Chapter 6
B) Chapter 8
C) Chapter 10
D) Chapter 12
E) Chapter 20

Question 72

Which of the following is true regarding actions that may be taken while an automatic stay is in effect in a Chapter 7 proceeding?

A) Creditors cannot attempt to repossess property during bankruptcy proceedings.
B) A creditor who received a judgment against a debtor prior to the bankruptcy filing may act to enforce the judgment.
C) Legal actions to collect child support payments are not subject to the stay.
D) Once a filing is allowed and a stay is in effect, the rules are the same regardless of previous bankruptcies.
E) All of these are true.

Question 73

Which of the following is false regarding Chapter 13 of the bankruptcy code?

A) Chapter 13 permits individuals to pay their debts to creditors in installment plans under the supervision of the court.
B) Any debtor who files under Chapter 13 could also have filed under Chapter 11.
C) Chapter 13 repayment plans are usually simpler and less expensive than Chapter 11 plans.
D) By statute Chapter 13 plans last between 36 and 60 months.
E) Individuals, partnerships and corporations may file for a Chapter 13 repayment plan.

Question 74

Which of the following is a payment made by an insolvent debtor that gives preferential treatment to one creditor over another?

A) An unfair payment
B) An unequal payment
C) A preferential payment
D) An unendorsed payment
E) An unapproved payment

Question 75

A _____________ is a written federal court order signed by a bankruptcy judge stating that the debtor is immune from creditor actions to collect debts.

A) Discharge
B) Release
C) Grant of immunity
D) Relinquishment
E) Abandonment

Question 76

Which of the following are nondischargeable debts under a Chapter 7 bankruptcy filing?

A) Claims of willful or malicious conduct by the debtor that caused injury to another person or property.
B) Specific student loans, unless payment of the loans imposes undue hardship on the debtor.
C) Debts not discharged in previous bankruptcies.
D) Judgments against a debtor for claims resulting from the debtor's drinking and driving.
E) All of these.

Question 77

Which of the following are not permitted to file under Chapter 11 reorganization?

A) Stockbrokers
B) Commodities brokers
C) Banks
D) Savings and loan companies
E) All of these

Question 78

Which of the following is a moratorium for almost all creditor litigation against a debtor in a Chapter 7 bankruptcy?

A) A stop order
B) An automatic stay
C) A semi-automatic dismissal
D) A semi-discharge
E) A means discharge

Question 79

How is a determination made regarding the identity of the permanent trustee in a Chapter 7 proceeding?

A) The bankruptcy judge appoints the trustee.
B) The district court judge appoints the trustee.
C) The court clerk appoints the trustee.
D) The debtor appoints the trustee.
E) The creditors elect the trustee.

Question 80

Which of the following is true regarding the effect of an automatic stay on claims of secured creditors in a Chapter 7 proceeding?

A) The stay affects claims of secured creditors in the same way in which it affects claims of unsecured creditors.
B) Secured creditors with claims of over $5,000 are not affected by the stay.
C) Secured creditors with claims of over $15,000 are not affected by the stay.
D) Secured creditors with claims of over $20,000 are not affected by the stay.
E) The court may exclude secured creditors from the stay if they petition the court to show that they do not have adequate protection under the stay.