Deck 11: Secured Transactions and Suretyship

Question 1

A person who owes money or a duty of performance to another is known as an):

A)obligor.
B)creditor.
C)pledger.
D)bailer.
E)debtor.

Answer 1

E

Question 2

In strict foreclosure,a secured creditor can accept the collateral in full satisfaction or partial satisfaction of the debt.

Answer 2

True

Question 3

Which of the following is a type of loan for which no collateral is pledged?

A)Commercial loan
B)Signature loan
C)Character loan
D)Unsecured loan
E)Guaranteed loan

Answer 3

B

Question 4

A financing statement requires the debtor's signature,unless the creditor is authorized to make the filing without a signature.

Question 5

A chattel mortgage refers to a debt secured against land,buildings,and fixtures.

Question 6

The property given as security for a debt is known as a:

A)proceed.
B)lien.
C)mortgage.
D)collateral.
E)pledge.

Question 7

Attachment is the process by which a security interest becomes enforceable against the debtor with respect to the collateral.

Question 8

A person who owes money to another is known as an obligor.

Question 9

The financing statement is effective for ten years from the date of filing.

Question 10

If a security interest was not perfected at the time of filing for bankruptcy,a bankruptcy trustee cannot take the collateral.

Question 11

A judicial bond is an assurance,generally purchased by an employer,to cover employees who are entrusted with valuable property or funds.

Question 12

A lien is security obtained through operation of law.

Question 13

Goods,other than farm products,held by a person for sale or lease or consisting of raw materials,works in progress,or material consumed in a business are known as:

A)inventories.
B)consumer goods.
C)equipment.
D)fixtures.
E)accessions.

Question 14

A lien creditor is a creditor whose claim is based on operation of law as opposed to a creditor whose claim is based on agreement.

Question 15

Accessions are goods that are physically united with other goods in such a manner that the identity of the original good is lost.

Question 16

The debtor's rights in collateral must be immediate rights to the possession but need not necessarily be rights that can be conveyed.

Question 17

After-acquired property refers to the proceeds received from the disposition of the collateral.

Question 18

A surety is a person who promises to pay or perform an obligation owed by the guarantor.

Question 19

A creditor stuck holding a promissory note with only a signature loan will get nothing if the debtor is insolvent.

Question 20

Security obtained through operation of law is known as a:

A)pledge.
B)bequest.
C)lien.
D)collateral.
E)mortgage.

Question 21

The property given to a creditor as security for a debt is known as:

A)a mortgage.
B)collateral.
C)a pledge.
D)a lien.
E)ademption.

Question 22

A surety bond that ensures a property owner of the completion of a construction contract or payment of actual damages to the extent of the bond in the event that the contractor fails to complete it is called a _____ bond:

A)judicial
B)fidelity
C)chattel
D)codicil
E)performance

Question 23

The substitution of one person for another who has a legal claim or right is known as:

A)subrogation.
B)exoneration.
C)foreclosure.
D)contribution.
E)perfection.

Question 24

The process by which a security interest becomes enforceable against the debtor with respect to the collateral is known as:

A)foreclosure.
B)attachment.
C)perfection.
D)exoneration.
E)subrogation.

Question 25

Which of the following is true of the rule of priorities regarding the disposal of a debtor's property when the debtor defaults?

A)Persons who become lien creditors before or after the security interest is perfected win.
B)If the security interest was perfected at the time of filing for bankruptcy,the bankruptcy trustee can take the collateral.
C)The Bankruptcy Act provides that a bankruptcy trustee can avoid a transfer of an interest of the debtor in property to or for the benefit of a creditor.
D)A perfected purchase-money security interest in goods other than inventory or livestock has priority over a conflicting security interest in the same goods.
E)A mortgage has priority over a perfected security in fixtures,even if the security interest is a purchase-money security interest.

Question 26

If,at a time a surety's obligation has matured,the principal can satisfy the obligation but refuses to do so,the surety is entitled to a court order requiring the principal to perform.This is known as:

A)contribution.
B)perfection.
C)foreclosure.
D)exoneration.
E)subrogation.

Question 27

A person who promises to act or pay upon the default of another is known as an):

A)surety.
B)debtor.
C)payee.
D)obligor.
E)pledger.

Question 28

What are the three different types of suretyship?

Question 29

The surety has certain defenses to paying.What are they?
e.g.,that debtor has defaulted several times before).
$\bullet$ General contract defenses: The surety may raise common defenses like incapacity infancy),lack of consideration unless promissory estoppel can be substituted or unless no separate consideration is necessary because the surety's and debtor's obligations arise at the same time),and creditor's fraud or duress on surety.However,fraud by the principal debtor on the surety to induce the suretyship will not release the surety if the creditor extended credit in good faith; if the creditor knows of the fraud perpetrated by the debtor on the surety,the surety may avoid liability.
Moderate

Question 30

The situation where the creditor takes the collateral,discharges the debtor,and has no right to seek any deficiency is known as:

A)exoneration.
B)blockbusting.
C)subrogation.
D)presentment.
E)strict foreclosure.

Question 31

An assurance,generally purchased by an employer,to cover employees who are entrusted with valuable property or funds is known as a _____ bond.

A)codicil
B)fidelity
C)judicial
D)performance
E)chattel

Question 32

A lien that is expanded to cover any additional property that is acquired by the debtor while the debt is outstanding is known as a:

A)tax lien.
B)possessory lien.
C)floating lien.
D)blanket lien.
E)judgment lien.