Deck 28: A: Creditors Rights and Remedies

Question 1

To use attachment as a remedy,a creditor must have possession of (be "attached" to)a debtor's property.

Answer 1

False

Question 2

The distinctions between a surety and a guarantor are recognized in all states.

Answer 2

False

Question 3

A guarantor can assert the principal debtor's bankruptcy as a defense to avoid liability on the obligation.

Answer 3

False

Question 4

The law protects debtors as well as creditors.

Question 5

Subrogation refers to the right of a co-surety to recover from the other co-sureties the amount paid above his or her proportionate share of a debt.

Question 6

Payment of the principal obligation will not discharge the guarantor from the obligation.

Question 7

When a person contracts for improvements on real property but does not immediately pay for the improvements,the creditor can place a mechanic's lien on the property.

Question 8

Personal property that is most often exempt from satisfaction of judgment debts does not include livestock.

Question 9

With a guaranty arrangement,the guarantor is secondarily liable.

Question 10

Under federal law,an employer can dismiss an employee because his or her wages are being garnished.

Question 11

A creditor's composition agreement is usually held to be unenforceable.

Question 12

A surety is not entitled to receive from the debtor outlays made on behalf of the suretyship arrangement.

Question 13

State law governs the procedures that must be followed to create a mechanic's lien.

Question 14

Creditors may not contract with a debtor for payment of a sum less than that owed.

Question 15

A creditor can garnish almost all types of property.

Question 16

Each state permits a debtor to retain the family home,in its entirety or in part,free from the claims of unsecured creditors.

Question 17

Making any material modification in the terms of a debtor's contract,without the consent of the surety,will not discharge the surety's obligation.

Question 18

Modern statutes permit the holder of an artisan's lien to foreclose and sell the property subject to the lien to sat?isfy the debt.

Question 19

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

Question 20

A surety can assert his or her own bankruptcy as a defense to avoid liability on a principal debtor's obligation.

Question 21

Fact Pattern 28-4B
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 28-4B.Mary will receive

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

Question 22

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)a mechanic's lien.
B)an order of garnishment.
C)an order that would violate most state laws.
D)a writ of attachment.

Question 23

Dolf borrows money from Elin.Dolf defaults.To use attachment as a remedy,Elin must first

A)file a suit against Dolf.
B)lose a suit against Dolf.
C)succeed in a suit against Dolf.
D)take possession of Dolf's property.

Question 24

Brick's debt to Conry is past due.Conry brings a legal action against Brick to collect the debt.To ensure that a judgment in Conry's favor will be collectible,Conry asks the court to order the seizure of Brick's property.Exempt from such an order in most states is

A)all of Brick's personal property.
B)as much of Brick's personal property as Brick opts to exempt.
C)equipment that Brick uses in a business up to a specified amount.
D)none of Brick's personal property.

Question 25

Fact Pattern 28-1B
Chocolate! Chocolate! Corporation is a new company that needs to borrow money to meet its payroll.Dayna,president and owner of Chocolate! Chocolate!,asks Evermore Credit Union to loan the funds to Chocolate! Chocolate!
Refer to Fact Pattern 28-1B.If Evermore insists that Dayna sign the loan applica?tion,making her personally liable for payment whether or not Chocolate! Chocolate! defaults,Dayna will be

A)a surety.
B)a lienor.
C)a garnishee.
D)a guarantor.

Question 26

Fact Pattern 28-4B
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 28-4B.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 27

Fact Pattern 28-3B (Questions
Dillon and Evan are brothers.They agree to act as guarantors on a loan made by their sister,Fiona.Fiona defaults on the payments and Dillon re?fuses to pay.Evan pays the debt.
Refer to Fact Pattern 28-3B.Evan can recover from Dillon under

A)the right of proportionate liability.
B)the right of reimbursement.
C)the right of contribution.
D)no right,because the parties are brothers.

Question 28

Fact Pattern 28-2B
Rico signs a lease on behalf of Start-Up Games,Inc. ,with Tower Office Suites.As part of the lease,Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 28-2B.If Start-Up stops paying the rent,it is most likely that li?ability or loss for the unpaid amount will rest with

A)no one.
B)Rico and Start-Up.
C)Tower Office Suites.
D)the other tenants on the same property.

Question 29

Suchin's debt to Trixie is past due.Trixie obtains a judgment against Suchin to collect the debt,but Suchin refuses to pay.Trixie asks the court to order the seizure and sale of Suchin's property.This is a request for

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

Question 30

Urbana performs a contract with Virgil to add a sun porch to Virgil's house,but Virgil does not pay.In most states,Urbana can create a lien and place it on Virgil's property by filing

A)a written guaranty contract.
B)a writ of attachment.
C)a writ of execution.
D)a written notice of lien.

Question 31

Bartleby owes $5,000 to Countryside Credit Union.As a prejudg?ment remedy to collect the debt,Countryside could use

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

Question 32

Bill and Cody agree to guarantee Wyatt's debt.Bill's maximum liabil?ity is $60,000,and Cody's is $40,000.Wyatt owes $40,000 and is in default.Bill pays the creditor the entire amount.In the ab?sence of an agree?ment to the contrary,Bill can recover from Cody

A)0.
B)$16,000.
C)$20,000.
D)$40,000.

Question 33

Fact Pattern 28-1B
Chocolate! Chocolate! Corporation is a new company that needs to borrow money to meet its payroll.Dayna,president and owner of Chocolate! Chocolate!,asks Evermore Credit Union to loan the funds to Chocolate! Chocolate!
Refer to Fact Pattern 28-1B.If Evermore insists that Dayna sign the loan applica?tion,making her personally liable for payment only if Chocolate! Chocolate! de?faults,Dayna will be

A)a surety.
B)a lienor.
C)a garnishee.
D)a guarantor.

Question 34

Jay is a surety for Katelyn's loan from Lucre Bank.Jay's right to be repaid by Katelyn after having paid her debt is the right of

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

Question 35

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

Question 36

Fact Pattern 28-4B
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 28-4B.Nina may recover

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

Question 37

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 38

Fact Pattern 28-1B
Chocolate! Chocolate! Corporation is a new company that needs to borrow money to meet its payroll.Dayna,president and owner of Chocolate! Chocolate!,asks Evermore Credit Union to loan the funds to Chocolate! Chocolate!
Refer to Fact Pattern 28-1B.Generally,for a contract between Evermore and Dayna with respect to liability for Chocolate! Chocolate!'s loan to be enforceable,it must be in writing if Dayna is

A)a surety.
B)a lienor.
C)a garnishee.
D)a guarantor.

Question 39

Fact Pattern 28-2B
Rico signs a lease on behalf of Start-Up Games,Inc. ,with Tower Office Suites.As part of the lease,Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 28-2B.The reason for the result in the previous question is that

A)Rico signed a "GUARANTY."
B)Tower Office Suites owns the property and can re-rent the premises.
C)the other tenants can equitably absorb a slight increase in rent.
D)Start-Up will likely move out when it stops paying the rent.

Question 40

Fact Pattern 28-3B (Questions
Dillon and Evan are brothers.They agree to act as guarantors on a loan made by their sister,Fiona.Fiona defaults on the payments and Dillon re?fuses to pay.Evan pays the debt.
Refer to Fact Pattern 28-3B.Evan can recover from Fiona under

A)the right of proportionate liability.
B)the right of reimbursement.
C)the right of subrogation.
D)no one,because the parties are brother and sister.

Question 41

Brie is a student at Collegiate University.In need of funds to pay for tuition and books,Brie asks Dependable Bank for a short-term loan.The bank agrees to make a loan if Brie will have someone who is financially responsible guarantee the loan payments.Esperanza,a well-known businessperson and a friend of Brie's family,calls the bank and agrees to pay the loan if Brie cannot.Because of Esperanza's reputation,the loan is made.Brie is making the payments,but because of illness she is unable to work for one month.She asks Dependable extend the loan for three months.The bank agrees,raising the interest rate for the extended period.Esperanza is not notified of the extension (and thus does not consent to it).One month later,Brie drops out of school.All attempts to collect the remainder of the loan from Brie fail.Can Dependable assert a claim against Esperanza on the debt?

Question 42

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?