Deck 27: Secured Transactions

Question 1

In a secured transaction, the debtor is the secured party.

Answer 1

False

Question 2

Intangible personal property cannot be used as collateral for a security agreement.

Answer 2

False

Question 3

________ 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

Answer 3

D

Question 4

Article 9 of the Uniform Commercial Code (UCC) governs transactions secured by tangible or intangible personal property.

Question 5

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 6

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 7

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

Question 8

When a buyer obtains a loan from a bank to pay a seller, the transaction is known as a(n) ________.

A) attachment
B) floating lien
C) two-party secured transaction
D) three-party secured transaction

Question 9

If a lender extends unsecured credit to a debtor, the creditor takes no interest in any collateral to secure the loan.

Question 10

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

Question 11

John buys a new car with the help of a loan. He permits the creditor to take possession of the car if he cannot repay the loan in time. Here, the car is the ________.

A) after-acquired property
B) collateral
C) intangible personal property
D) floating lien

Question 12

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

Question 13

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 14

William buys a $500,000 house from Keith Geller through a realtor. He makes a down payment of $200,000. He borrows the rest from Smith and Sons, a lending firm, and places his new house as collateral for the loan. Who is the debtor in this case?

A) William
B) Keith Geller
C) Smith and Sons
D) the realtor

Question 15

A ________ has an ownership or other interest in the collateral and owes payment of a secured obligation.

A) creditor
B) debtor
C) seller
D) lender

Question 16

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

Question 17

A property in which a security interest is taken is called ________.

A) collateral
B) escrow
C) attachment
D) leverage

Question 18

Which of the following is considered tangible personal property?

A) car
B) mutual fund investment
C) trademark
D) patent

Question 19

A business purchases an airplane from an airplane manufacturer. The business obtains a loan to purchase the airplane from a bank, which obtains a security interest in the airplane. The airplane manufacturer is paid for the airplane out of the proceeds of the loan. This is a(n) ________ transaction.

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

Question 20

The extension of secured credit requires a debtor's pledge of some personal property as collateral for a loan.

Question 21

A three-party secured transaction occurs when a seller sells goods to a buyer who has obtained financing from a third-party lender who takes a security interest in the goods sold.

Question 22

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 23

Which of the following refers to the assets resulting from the exchange or disposal of collateral subject to a security agreement?

A) sale proceeds
B) future advances
C) floating lien
D) after-acquired property

Question 24

Security interest is the rate of interest per annum which is entitled to the party that secures payment or performance of an obligation.

Question 25

Accessions are pieces of individual property or goods that are not united with any other property.

Question 26

A(n) ________ is a situation in which a creditor has an enforceable security interest against a debtor and can satisfy the debt out of the designated collateral.

A) floating lien
B) secured transaction
C) attachment
D) redemption

Question 27

A ________ is a record that evidences both a monetary obligation and a security interest in specific goods and software used in the goods.

A) chattel paper
B) citation
C) financing statement
D) document of possession

Question 28

Which of the following is considered intangible personal property?

A) vehicles
B) equipment
C) accessions
D) deposit accounts

Question 29

Distinguish between two-party and three-party secured transactions, and provide some examples.

Question 30

Kimberly borrows $50,000 from a bank. She gives the bank a security interest in her ________ inventory. This implies that if Kimberly does not repay the loan in the stipulated period, the bank can claim any assets she purchased after signing the security agreement.

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

Question 31

A(n) ________ is property that a debtor acquires after the execution of a security agreement.

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

Question 32

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

Question 33

A ________ is a written document signed by a debtor that creates a security interest in personal property.

A) license
B) lease agreement
C) security agreement
D) chattel paper

Question 34

A two-party secured transaction occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods.

Question 35

Chattel paper is considered tangible personal property.

Question 36

Which of the following terms refers to goods that are physically united with other goods in such a manner that the identity of the original goods is not lost?

A) inventories
B) general intangibles
C) accessions
D) stocks

Question 37

Chattel paper is a record that evidences both a monetary obligation and a security interest in specific goods and software used in the goods.

Question 38

In a three-party secured transaction, the party that purchases the goods or services is known as the buyer-secured creditor.

Question 39

What is a secured transaction?

Question 40

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

Question 41

________ 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 42

Which of the following is true of financing statements?

A) They cannot be electronically filed.
B) They are effective for one year from the date of filing.
C) They cannot be extended once they expire.
D) They are available for review by the public.

Question 43

A ________ 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 44

Financing statements are effective for five years from the date of filing.

Question 45

A financing statement covering fixtures is called a continuation statement.

Question 46

Attachments are funds advanced to a debtor from a line of credit secured by collateral.

Question 47

A ________ is 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 48

Marcia buys a $3,000 high-definition plasma television for her home on credit extended by the seller, Better Buy. Better Buy requires Marcia to sign a security agreement. Better Buy has a ________ interest in the television that is automatically perfected at the time of the credit sale.

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

Question 49

Which of the following is true of perfection by possession of collateral?

A) A creditor cannot take possession of the collateral until a financing statement is filed.
B) No financing statement has to be filed if the creditor has physical possession of the collateral.
C) A debtor cannot acquire security against the collateral without filing a financing statement.
D) A financing statement can be filed only against intangible personal property placed as collateral.

Question 50

The term "sales proceeds" refers to the resulting assets from the sale, exchange, or disposal of collateral subject to a security agreement.

Question 51

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

Question 52

Perfection ________ is a situation where the creditor does not have to file a financing statement or take possession of the goods to perfect a security interest.

A) by possession of collateral
B) by attachment
C) by claim
D) without statement

Question 53

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 54

Define floating lien and explain the three types of property to which a floating lien can attach.

Question 55

A financing statement 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.

Question 56

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

Question 57

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

Question 58

Kelly borrows $12,000 from Terry Oswald to pay for her mother's surgery. The debt-repayment period is 15 months, but Kelly manages to repay it in 11 months. Which of the following must be filed by Oswald after receiving the final installment of his money?

A) financing statement
B) statement of collateral claim
C) termination statement
D) continuation statement

Question 59

Only one continuation statement can be filed for a financing statement.

Question 60

After-acquired property is property obtained by the creditor after a security agreement has been executed.

Question 61

Which of the following is true of the priority of claims?

A) If two or more secured parties claim an interest in the same collateral but only one has perfected his or her security interest, the perfected security interest has priority.
B) Although one of the parties to claim an interest in the collateral has perfected his or her security interest, all the parties are given fair and equal priority.
C) If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, they are given equal priority irrespective of attachments.
D) If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, the first to claim has priority.

Question 62

Which of the following is true of disposition of collateral?

A) Disposition of collateral must be a public proceeding.
B) The debtor is entitled to receive any surplus collateral that remains after disposition.
C) The debtor need not be notified of the disposition as the creditor has complete claim on the collateral.
D) Disposition of collateral occurs when the default is by the creditor.

Question 63

Gregory borrows $200,000 from Mountain Bank to purchase a plot of land, and Mountain Bank perfects its security interest. Gregory defaults on the loan, and owes an outstanding balance of $80,000. His house has gone down in value to $160,000 at the time of default, but he has other personal assets to satisfy the debt. Which of the following is a course of action for Mountain Bank to recover the debt after foreclosing on the loan?

A) proceed to judgment against Gregory
B) file a financing statement
C) release a termination statement
D) proceed to repossess the collateral

Question 64

An artisan's lien is a statutory lien given to workers who furnish services or materials on or for personal property in the ordinary course of business.

Question 65

A creditor who has the only secured interest in the debtor's collateral has priority over unsecured interests.

Question 66

Repossession refers to a right granted to a secured creditor to take possession of collateral in the event of a default by the debtor.

Question 67

The term ________ refers to a secured creditor's possession of collateral on a debtor's default and proposal to retain the collateral in satisfaction of the debtor's obligation.

A) repossession
B) disposal of the goods
C) disposing of collateral
D) retaining the collateral

Question 68

A termination statement is filed when the secured party wishes to claim the collateral because the debt has not been paid.

Question 69

Explain the priority of claims for secured and unsecured transactions.

Question 70

Darrel, Smith, Keith, and Aaron are claimants to a collateral interest. Smith and Darrel secure their interests. Aaron takes physical possession of the collateral. Keith files a financing statement some time later. Who among the four will have highest priority of claim to the collateral?

A) Darrel
B) Smith
C) Keith
D) Aaron

Question 71

What is repossession?

A) a right granted to a debtor to take possession of the collateral after repayment of the debt
B) a right granted to a debtor to take possession of the collateral before repayment of the debt
C) a right granted to a secured creditor to take possession of the collateral on default by the debtor
D) an act of possession of the collateral by the court owing to default by both debtor and creditor

Question 72

The term ________ refers to a secured creditor's repossession of collateral on a debtor's default and selling, leasing, or otherwise disposing of it in a commercially reasonable manner.

A) repossession
B) disposal of the goods
C) disposition of collateral
D) retaining of collateral

Question 73

For an artisan's lien to be effective, the artisan must be in possession of the property.

Question 74

The inability of a debtor to pay a debt because of bankruptcy does not constitute default.

Question 75

Which of the following is a default?

A) repaying a debt before it is due
B) bankruptcy of the debtor
C) increase of rate of interest by the creditor midway through debt repayment
D) theft of the collateral

Question 76

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

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

Question 77

After a debtor's default, if the proceeds from the disposition of collateral are not sufficient to satisfy the debt to the secured party, the debtor is personally liable to the secured party for the payment of the deficiency.

Question 78

Retention of collateral refers to a debtor's repossession of the collateral after paying the debt.

Question 79

What is a financing statement? What is its significance in perfecting a security interest?

Question 80

Which of the following permits a secured lender to recover other property or income from a defaulting debtor if the collateral is insufficient to repay the unpaid loan?

A) Redemption right
B) Deficiency judgment
C) Disposition of collateral
D) Retention of collateral