Deck 30: Secured Transactions

Question 1

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.

Answer 1

A secured interest.

Question 2

According to the UCC, value is consideration.

Answer 2

True

Question 3

A(n) ______ 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 3

Secured transaction

Question 4

Generally, unsecured parties have priority over secured creditors.

Question 5

To become a secured party, the creditor must perfect a security interest in the collateral of the debtor.

Question 6

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 7

Which of the following is not an example of a good?

A) Consumer goods.
B) Farm products.
C) Documents of title.
D) Inventory.
E) Equipment.

Question 8

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

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

Question 9

When perfection by possession occurs, the parties must have a written security agreement.

Question 10

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

Question 11

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

Question 12

Which of the following was the result in the bankruptcy case in the text In re Robert O. Troupe and Dawn Lynn Troupe involving the issue of whether a tractor dealer's failure to file a financing statement rendered its purchase money security interest unperfected because the tractor was equipment used for business purposes, or whether the security interest was automatically perfected as an interest in a consumer good?

A) The tractor dealer prevailed because classification of collateral is determined as of the time of the creation of the security interest, and the consumers were bound by the representation on the security agreement that the tractor was to be used as consumer goods.
B) The tractor dealer prevailed because although representations made by the buyers on the security agreement were not controlling, the buyers were using the tractor as a consumer good at the time of default, the time at which classification of collateral is made in any dispute.
C) The bankruptcy trustee prevailed because the consumers made misrepresentations at the time of the sale as to the use of the tractor and wrongfully claimed that it was for consumer use when it was actually to be used as equipment in a business endeavor.
D) The bankruptcy trustee prevailed because although no misrepresentations were made at the time of the sale, the tractor was being used as equipment in a business endeavor at the time of default; and the time of default is the point at which issues involving use are determined.
E) The bankruptcy trustee prevailed because when at the time of default, collateral is used partly as a consumer good and partly as equipment in a business endeavor, the collateral loses its status as a consumer good.

Question 13

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 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 unless the security interest is perfected.

Question 15

Which of the following is false regarding types of collateral?

A) Collateral may include farm products.
B) Collateral may include goods such as equipment.
C) Collateral may include indispensable paper such as documents of title.
D) Collateral may include intangibles such as chattel paper.
E) Collateral may include proceeds.

Question 16

If a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest, the buyer can obtain the good involved free of any security interest.

Question 17

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

Question 18

Which of the following is true regarding what may constitute collateral?

A) Goods, indispensable paper, intangibles, and proceeds may all constitute collateral.
B) Goods, indispensable paper, and intangibles may constitute collateral, but proceeds may not.
C) Goods may constitute collateral, but indispensable paper, intangibles, and proceeds may not.
D) Goods and proceeds may constitute collateral, but indispensable paper and intangibles may not.
E) Goods and intangibles may constitute collateral, but indispensable paper and proceeds may not.

Question 19

Which of the following articles of the UCC governs secured transactions in personal property?

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

Question 20

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 21

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 22

Transfer of collateral to a secured party is called a[n] ____.

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

Question 23

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 24

Which of the following was the result in the case in the text In re Girolamo Afonica, the case in which a debtor's bankruptcy discharge was challenged by a bank that held a security interest in a vehicle that the plaintiff, without notice to the bank, transferred to a junk dealer because his ex-wife did not like it sitting in her driveway?

A) The court found that the debtor transferred the vehicle with the specific intent to hinder, delay, or defraud the plaintiff and that his discharge would be denied in total as to all debts, not just the one owed to the plaintiff bank.
B) The court found that the defendant's bankruptcy discharge would not be denied in total, but that the discharge as to the plaintiff bank's interest would be denied.
C) The court found that the defendant's bankruptcy discharge would be allowed in total, including the discharge as to the vehicle, because the bank failed to notify the defendant that he was required to provide notification prior to disposing of collateral.
D) The court found that the defendant's bankruptcy discharge would be allowed in total, including the discharge as to the vehicle, because the bank failed to prove that the defendant acted with malice.
E) The court found that the defendant's bankruptcy discharge would be allowed in total, including the discharge as to the vehicle, because the vehicle was worth less than $1,000 at the time of transfer.

Question 25

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 loaned money first will prevail.
C) The parties will divide the proceeds from the sale of the collateral evenly between them.
D) The party who loaned the most money on the collateral has priority.
E) The party who first notified the debtor of a missed payment has priority.

Question 26

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 27

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 28

What did the court conclude in the Case Opener, the case in which the plaintiff claimed that her repossessed vehicle was not sold in a commercially reasonably manner and that she was wrongly left with a deficiency?

A) That showing that the sale grossed more than 50% of the vehicle's value established that the sale was commercially reasonable.
B) That good faith in selling the vehicle as a matter of law established commercial reasonableness.
C) That the secured party failed to prove that its sale of the vehicle conformed with established trade practices.
D) That there was no obligation on the seller to engage in a commercially reasonable sale because the plaintiff was in default.
E) That while not every aspect of the sale had to be commercially reasonable, the seller failed to show that sufficient advertisement of the sale was accomplished thereby rendering the sale itself commercially unreasonable.

Question 29

Which of the following is true regarding priority in a dispute involving a purchase-money security interest in business goods other than inventory?

A) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 20 days of the debtor's possession of the collateral.
B) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 30 days of the debtor's possession of the collateral.
C) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 40 days of the debtor's possession of the collateral.
D) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 45 days of the debtor's possession of the collateral.
E) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 60 days of the debtor's possession of the collateral.

Question 30

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 31

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 32

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 33

Which of the following was the result In Re Tower Air Inc., the case in the text in which a debtor made repairs to an aircraft used as collateral without claiming available insurance proceeds, later filed bankruptcy, and the bankruptcy trustee and the creditor each claimed entitlement to the insurance proceeds?

A) The court ruled in favor of the bankruptcy trustee on the basis that regardless of whether or not repairs were made, the right to claim the proceeds belonged to the debtor; and the trustee succeeded to the rights of the debtor.
B) The court ruled in favor of the bankruptcy trustee on the basis that because the debtor had already repaired the collateral, the trustee was entitled to the proceeds of the insurance policy.
C) The court ruled in favor of the bankruptcy trustee on the basis that the trustee made first claim to the insurance proceeds and already had the proceeds in possession when the creditor first claimed entitlement to them.
D) The court ruled that the creditor was entitled to the full insurance proceeds, without consideration of the amount of the debt, on the basis that it had a secured interest.
E) The court ruled that the creditor was entitled to the proceeds of the insurance policy up to the amount of the debt on the basis that it had a secured interest.

Question 34

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

A) The names and addresses of all parties involved only.
B) Two items: (1) the names and addresses of all the parties involved and (2) a description of the collateral.
C) Three items: (1) the names and addresses of all the parties involved, (2) a description of the collateral, and (3) the signature of the debtor.
D) Three items: (1) the name of the financing bank, (2) the name of the debtor, and (3) a description of the collateral only.
E) Three items: (1) the name of the financing bank, (2) the signature of the debtor, and (3) a description of the collateral.

Question 35

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

A) A secured party automatically has an interest in proceeds.
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 only if the secured party has a signed statement from the debtor granting an interest in proceeds.
E) The secured party may not acquire a security interest in proceeds.

Question 36

Which of the following is true regarding a security interest in consumer goods?

A) A financing statement must be filed in order to perfect a security interest in consumer goods.
B) Under federal consumer protection legislation, a seller may not hold a security interest in consumer goods.
C) Under most state laws, a seller may not hold a security interest in consumer goods.
D) When a creditor sells a consumer good to a debtor on a credit basis, the security interest perfects automatically.
E) When a creditor sells a consumer good to a debtor on a credit basis, the security interest is perfected by the seller's possession.

Question 37

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 38

Once a financing statement has been filed with a correct agency, for how long is the statement valid under the UCC?

A) 1 year
B) 2 years
C) 3 years
D) 4 years
E) 5 years

Question 39

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 40

Which of the following is true regarding the court's opinion in Lingross v. Heilig-Meyers Furniture, the case in the text in which the plaintiffs alleged that the defending furniture store's agents engaged in wrongful repossession efforts?

A) The court ruled that the defendant had no right to engage in self help in regard to repossession, regardless of whether or not it had a judgment.
B) The court ruled that because it had no judgment against the debtor, the defendant had no right to engage in self help in regard to repossession.
C) The court ruled that because it did not physically harm any residents of the home, the defendant rightfully exercised its self help rights in regard to repossession.
D) The court ruled that a creditor may engage in self help repossession where the creditor can do so without a breach of the peace and also that a debtor's protest at repossession terminates the creditor's self help rights.
E) The court ruled that a creditor may engage in self help repossession where the creditor can do so without a breach of the peace and that a creditor retains those rights regardless of whether or not a debtor protests.

Question 41

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest.

-Which of the following is true regarding priority in rights to the computer?

A) The bank had priority because the computer was considered after-acquired property properly covered by the initial security interest.
B) XYZ Electronics had priority because XYZ Electronics had a purchase-money security interest in the computer.
C) XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 10 days of the purchase.
D) XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 20 days of the purchase.
E) The bank had a security interest in the computer because it perfected its security interest before XYZ Electronics did so.

Question 42

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 only.
B) The sale must be in a public sale only.
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 43

Which of the following is a term used to identify 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 44

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest.

-Which of the following is true regarding the effect of XYZ Electronics filing a security interest?

A) The claim was perfected.
B) The claim was guaranteed.
C) The claim was secured.
D) The claim was acknowledged.
E) There was no effect because there can only be one security interest, and the bank already had that.

Question 45

Which of the following is the proper designation under the UCC for the television?

A) It is a consumer good
B) It is a pledge
C) It is an allonge
D) It is unsecured property
E) It is equipment

Question 46

"Overextended Debtor." For his home, Dennis purchased a big screen television from ABC Electronics and financed the purchase through ABC Electronics. Later, because Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend, and some other items, he was unable to continue making payments on the television. The manager from ABC Electronics called 60 days after the sale and asked Dennis to return the television. Dennis refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.

-Which of the following is the term for the type of agreement Dennis had with ABC Electronics?

A) A pledged money interest.
B) A collateralized interest.
C) A purchase-money security interest.
D) A security perfection interest.
E) A cash deferred security interest.

Question 47

Which of the following is false regarding a creditor's rights to collateral upon a debtor's default?

A) If a debtor defaults on a loan, the secured party can take possession of the collateral so long as the debtor does not breach the peace.
B) Under the UCC, the secured party can sell, lease, or transfer the collateral in any commercially reasonable method.
C) Regardless of where the collateral is sold, the secured party must strive to receive the best price for the collateral.
D) Instead of disposing of the collateral, the secured party may choose to keep the collateral in full or partial satisfaction of the debt.
E) A debtor in default has no rights in regard to whether collateral is retained by the secured party or sold.

Question 48

Which of the following is true regarding the definition of default under the UCC?

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) The UCC does not define default.

Question 49

"Repossession." Tina sold used vehicles. She sold a used pick-up truck to Joan and a used convertible to Barry. She properly obtained a security interest in both vehicles. Both Joan and Barry defaulted on payments owed to Tina for the vehicles. Tina was under the belief that her only option was to take possession of the collateral. Tina decided that she would repossess Joan's pick-up at Joan's house. Therefore, Tina slipped into the driveway one evening at midnight and started the engine. Joan immediately ran out and confronted Tina. Tina shoved Joan away and drove off in the pick-up truck. Tina was able to repossess Barry's convertible in a public parking lot with no altercation with him.

-Which of the following is true regarding Tina's belief that her only option was to take possession of the collateral?

A) Tina was correct regardless of whether a vehicle or another type of good was involved.
B) Tina was correct, but only because a vehicle was involved.
C) Tina was incorrect, because only when a vehicle is involved, a party must disregard the collateral and proceed to judgment.
D) Tina was incorrect because regardless of whether a vehicle or another type of good was involved, Tina only had the right to ignore the collateral and proceed to judgment.
E) Tina was incorrect because regardless of whether a vehicle or another type of good was involved, Tina had the right to either take possession of the collateral or ignore rights in the collateral and proceed to judgment.

Question 50

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 51

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 52

How long does a debtor have in which to object to a secured party's retention of collateral to satisfy a debt?

A) 5 Days.
B) 10 Days.
C) 20 Days.
D) 30 Days.
E) 60 Days.

Question 53

Which of the following is true 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, so long as the buyer purchases the good for his or her personal use, 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 personal use or resale, and purchases good before the secured party files a financial statement, the buyer obtains the good free of the security interest.

Question 54

"Repossession." Tina sold used vehicles. She sold a used pick-up truck to Joan and a used convertible to Barry. She properly obtained a security interest in both vehicles. Both Joan and Barry defaulted on payments owed to Tina for the vehicles. Tina was under the belief that her only option was to take possession of the collateral. Tina decided that she would repossess Joan's pick-up at Joan's house. Therefore, Tina slipped into the driveway one evening at midnight and started the engine. Joan immediately ran out and confronted Tina. Tina shoved Joan away and drove off in the pick-up truck. Tina was able to repossess Barry's convertible in a public parking lot with no altercation with him.

-Which of the following is true regarding Tina's taking possession of Barry's convertible?

A) Tina breached the peace because she did not provide Barry prior notification that she was going to repossess the vehicle.
B) Tina breached the peace because she took the vehicle from a public lot.
C) Tina breached the peace unless she can establish that Barry gave her prior permission to repossess the vehicle in a public lot.
D) Tina did not breach the peace because she acted in a reasonable manner in taking the collateral.
E) Tina did not breach the peace because Barry sustained no documented physical injury.

Question 55

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest.

-Which of the following is the proper designation for any equipment subject to the bank's security interest that Molly obtains after the initial loan agreement?

A) After-acquired property.
B) Post-dated property.
C) Cover property.
D) Post-security property.
E) There is no title for such property because such property may not validly be the subject of the security interest.

Question 56

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest.

-Which of the following is true regarding any compensation that Molly is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

A) She may recover $100 from the bank.
B) She may recover $200 from the bank.
C) She may recover $500 from the bank.
D) She may recover $1,000 from the bank.
E) She may not recover anything unless she incurred damages; and, in that event, she may recover the amount of her compensatory damages.

Question 57

"Overextended Debtor." For his home, Dennis purchased a big screen television from ABC Electronics and financed the purchase through ABC Electronics. Later, because Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend, and some other items, he was unable to continue making payments on the television. The manager from ABC Electronics called 60 days after the sale and asked Dennis to return the television. Dennis refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.

-Which of the following is correct regarding the statement of Dennis that the security interest of ABC was not perfected?

A) Dennis is wrong because the security interest perfected immediately.
B) Dennis is correct because the security interest perfected when he was still in possession of the collateral 30 days after the purchase.
C) Dennis is correct because the security interest perfected when he was still in possession of the collateral 60 days after the purchase.
D) Dennis is correct because no financing statement was filed.
E) Dennis is correct only because in the case of luxury goods, a financing statement must be filed within 20 days of the sale in order for the seller to establish perfection.

Question 58

"Repossession." Tina sold used vehicles. She sold a used pick-up truck to Joan and a used convertible to Barry. She properly obtained a security interest in both vehicles. Both Joan and Barry defaulted on payments owed to Tina for the vehicles. Tina was under the belief that her only option was to take possession of the collateral. Tina decided that she would repossess Joan's pick-up at Joan's house. Therefore, Tina slipped into the driveway one evening at midnight and started the engine. Joan immediately ran out and confronted Tina. Tina shoved Joan away and drove off in the pick-up truck. Tina was able to repossess Barry's convertible in a public parking lot with no altercation with him.

-Which of the following is true regarding Tina's repossession of the pick-up truck?

A) She breached the peace in recovering the collateral.
B) Tina did not breach the peace in recovering the collateral unless Joan can establish the existence of actual injuries.
C) Tina did not breach the peace because she was entitled to repossess the vehicle and any injury sustained by Joan was her own fault.
D) Tina breached the peace, but only because she did not provide Joan with prior notification that she was coming to repossess the collateral.
E) Tina breached the peace, but only because she acted to repossess the collateral after 10:00 p.m. at night.

Question 59

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest.

-What should the bank have done to terminate its interest in any property of Molly?

A) The bank should have filed a termination statement within 20 days.
B) The bank should have filed a termination statement within one month.
C) The bank should have filed a waiver statement within 20 days.
D) The bank should have filed a waiver statement within one month.
E) The bank should have filed a stopgap statement by the time Molly's next payment was due had she not paid off the loan.

Question 60

"Overextended Debtor." For his home, Dennis purchased a big screen television from ABC Electronics and financed the purchase through ABC Electronics. Later, because Dennis had bought a boat, a new car, an expensive engagement ring for his girlfriend, and some other items, he was unable to continue making payments on the television. The manager from ABC Electronics called 60 days after the sale and asked Dennis to return the television. Dennis refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.

-In a dispute between Dennis, ABC Electronics, and XYZ Credit regarding entitlement to the television, who is likely to win and why?

A) ABC Electronics will prevail because, as a seller of consumer goods, it did not need a perfected security interest in order to prevail against other creditors.
B) ABC Electronics will prevail because it had a perfected security interest.
C) XYZ Credit will prevail because although ABC Electronics had a perfected security interest, it did not file a financing statement.
D) XYZ Credit will prevail because a luxury good was involved and, although ABC Electronics had a perfected security interest, it did not file a financing statement as required within 10 days of the sale.
E) XYZ Credit will prevail because it had a perfected security interest in a greater amount of goods than did ABC Electronics.

Question 61

List three advantages discussed in the text associated with perfection by possession.

Question 62

What rights, if any, does a creditor who does not wish to repossess collateral have in the event of a default and why might a creditor prefer a remedy other than repossession of collateral?

Question 63

Set forth the steps that a creditor must take to become a secured party.

Question 64

Everett buys a new bicycle on credit from Bicycle City. Bicycle City has a security agreement establishing a purchase-money security interest in the bicycle. Everett, however, discovers that he does not have enough money to pay his rent. Therefore, he sells his bicycle to his neighbor, Helen, who is unaware of Bicycle City's security interest in the bicycle. Everett fails to make payments on the bicycle and Bicycle City seeks to repossess it. Discuss the rights and obligations of the parties.

Question 65

What does the UCC provide regarding protection in movable collateral that is moved from one state to another?