Deck 29: B: Secured Transactions

Question 1

The state office in which a financing statement should be filed depends on the debtor's location.

Answer 1

True

Question 2

Attachment gives the creditor an enforceable security interest in the collateral.

Answer 2

True

Question 3

A security interest is enforceable only if the collateral is in the secured party's possession.

Answer 3

False

Question 4

A continuation statement will continue the effectiveness of a financing statement for five years.

Question 5

Filing a financing statement with the appropriate public office is the only way to per?fect a security interest.

Question 6

A financing statement cannot be filed electronically.

Question 7

A financing statement must be filed under the debtor's trade name.

Question 8

When more than one security interest has been perfected in the same collateral,their claims are satisfied proportionately to their value.

Question 9

A financing statement is effective for no more than six months from the date of filing.

Question 10

A perfected purchase-money security interest in inventory can have priority over a conflicting security interest in the same inventory.

Question 11

Once default has occurred and the secured party has obtained possession of the collateral,the secured party has no more options.

Question 12

Whatever a secured party obtains on a sale of collateral is all that he or she can collect on the debt.

Question 13

A security interest that provides for a security interest in after-acquired property is a floating lien.

Question 14

On the debtor's default,a secured party can take possession of the collateral covered by the security agreement only by court order.

Question 15

A purchase-money security interest in a business's inventory is perfected automatically at the time of a credit sale.

Question 16

Advances against lines of credit can be subject to a properly perfected security interest in certain collateral.

Question 17

To create an enforceable security interest,the secured party must give the debtor something of value.

Question 18

Any creditor who has a security interest in a debtor's collateral is the secured party.

Question 19

A buyer in the ordinary course of business has priority unless a previously perfected security interest exists as to the goods.

Question 20

A security agreement must contain a description of the collateral that reasonably identifies it.

Question 21

The payment of Dagmar's debt to Evander is guaranteed by Dagmar's personal property.This is

A)a lien.
B)a secured transaction.
C)a real property mortgage.
D)a violation of most state laws.

Question 22

Super Chef Appliance Company allows Reba to take a set of kitchen appli?ances that she bought from Super Chef even though she has not paid the full price.Super Chef's legally sufficient financing statement in the goods need not include

A)a description of the collateral.
B)a statement of the reason for allowing Reba to take the goods.
C)Super Chef's name.
D)Reba's name.

Question 23

The payment of Hu's debt to Ian is guaranteed by Hu's personal prop?erty.To give public notice of his interest in Hu's property,Ian is most likely to

A)attach a bright label to Hu's property.
B)e-mail other potential creditors.
C)file a financing statement with the appropriate authority.
D)publish a collection notice in local newspapers.

Question 24

The payment of Florida's debt to Guillermo is guaranteed by Florida's personal property.Guillermo is

A)a lienor.
B)a secured party.
C)a mortgagee.
D)a usurer.

Question 25

The payment of Laine's debt to Mingo is guaranteed by Laine's personal property.The process by which Mingo can protect himself against the claims of third parties to this property is

A)attachment.
B)authentication.
C)perfection.
D)bankruptcy.

Question 26

Mona lives in New Jersey,but she works in New York.Mona borrows $1,000 from National Bank,using her motorcycle as collateral.To perfect its security in?terest,the bank must file its financing statement in at least

A)every state.
B)New Jersey.
C)New Jersey and New York.
D)New York.

Question 27

Ron does not make a payment on his car loan for several months.The dealer,Star Auto,repossesses the car by towing it from a public parking lot.Ron sues Star for breach of the peace.Ron will probably

A)prevail,because Ron has not formally defaulted on the car loan.
B)prevail,because the car was in a public lot when it was towed.
C)not prevail,because the repossession was not a breach of the peace.
D)not prevail,because a creditor can repossess property in which it holds an interest if no threats or force are used against a debtor.

Question 28

Fact Pattern 29-1A
Luxuro Vehicles,Inc. ,makes and sells automobiles to auto dealers,including MotorPros Auto & Truck Sales.MotorPros sells the cars to consumers and businesses.
Refer to Fact Pattern 29-1A.Oakes,a police officer,buys a Luxuro from MotorPros to drive in his off-duty hours.Oakes's Luxuro is

A)a consumer good.
B)an instrument.
C)equipment.
D)inventory.

Question 29

Olive borrows from Polo and Quennell,using the same collateral for both loans.Only Quennell has a perfected security interest.Olive defaults on both loans.The party with first rights to the collateral is

A)Olive.
B)Polo and Quennell,in proportion to Olive's debt to each.
C)Polo.
D)Quennell.

Question 30

The payment of Yves's debt to Zane is guaranteed by Yves's personal property.Their agreement describes Yves's subject property by serial number.To establish Zane's interest,this is

A)irrelevant.
B)not sufficient.
C)sufficient if it accurately describes the parties' agreement.
D)sufficient unless it is too tedious to review.

Question 31

Fact Pattern 29-1A
Luxuro Vehicles,Inc. ,makes and sells automobiles to auto dealers,including MotorPros Auto & Truck Sales.MotorPros sells the cars to consumers and businesses.
Refer to Fact Pattern 29-1A.Nani,a professional driver,buys a customized Luxuro from MotorPros to drive in a Grand Prix race.Nani's Luxuro is

A)a consumer good.
B)an instrument.
C)equipment.
D)inventory.

Question 32

Hal's Hardware store defaults on a debt to Intrastate Bank,which takes possession of the collateral securing the debt.Intrastate sells the collat?eral.The proceeds from the sale are applied first to

A)Hal's debt to Intrastate.
B)Hal's debts to other creditors.
C)Intrastate's fees for the sale.
D)payments Hal's made on the debt to Intrastate.

Question 33

Experienced Capital Company and First Street Bank are secured parties with security interests in property owned by Grande Oil Corpora?tion.Between these security interests,the first to be filed or perfected has prior?ity over other filed or per?fected security interests in

A)most circumstances.
B)no circumstances.
C)states that have not adopted Article 9 of the UCC.
D)states that require a security agreement to be signed and dated by the creditor.

Question 34

OK Investments,Inc. ,files a financing statement to provide no?tice of its security interest in the property of Pancake House Restaurant.The initial ef?fec?tive term of a financing statement is a period of

A)five days.
B)five months.
C)five weeks.
D)five years.

Question 35

Bayside Credit Corporation lends funds to Claude,a consumer,to apply to the cost of a boat,which is the collateral for the loan.An enforceable security interest requires

A)a written agreement and Bayside's possession of the boat.
B)a written agreement or Bayside's possession of the boat.
C)the boat seller's acknowledgement of the loan in writing.
D)Claude's possession of the boat.

Question 36

Elias repays his debt,incurred to buy consumer goods,to Finance Bank and immediately files a written request for a termination state?ment.Finance

A)must comply within one month of receipt of the letter.
B)must comply within twenty days of receipt of the letter.
C)must refund $500 to Elias.
D)is not required not comply.

Question 37

Clear Sky Credit Corporation asks Dimension Games Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired prop?erty.This is

A)the first-in,first-out rule.
B)a floating lien.
C)a violation of most state laws.
D)a future advance.

Question 38

Danica borrows $1,000 from Evermore Bank,using her motorcycle as collateral.To perfect its security in?terest,the bank must file its financing statement with

A)the secretary of state.
B)the county clerk.
C)the city treasurer.
D)the ward alderman.

Question 39

Fact Pattern 29-1A
Luxuro Vehicles,Inc. ,makes and sells automobiles to auto dealers,including MotorPros Auto & Truck Sales.MotorPros sells the cars to consumers and businesses.
Refer to Fact Pattern 29-1A.A car in MotorPros's possession is most likely

A)a consumer good.
B)an instrument.
C)equipment.
D)inventory.

Question 40

Saf-T Lenders,Inc. ,takes possession of Tiara's stock in Urgent Care Corporation to perfect Saf-T's security interest in the stock.This is

A)after-acquired property.
B)a pledge.
C)a purchase-money security interest.
D)a violation of most state laws.

Question 41

Efrem owns Fans & Players,a retail sporting goods shop.When Great Hill Lodge,a new ski resort,is built in the area,Efrem decides to expand and borrows a large sum from Hometown Bank.The bank takes a secu?rity interest in Efrem's present inventory and any after-acquired inven?tory as collateral for the loan.The bank properly perfects the security in?terest by filing a financing statement.Efrem's business is profitable,and he begins doubling his inventory.A year later,an avalanche destroys the ski slope and lodge.Efrem's business takes a turn for the worse,and he defaults on his debt to the bank.The bank seeks possession of his en?tire inventory,even though the inventory is twice as large as it was when the loan was made.Efrem claims that the bank has rights to only half of his inventory.Is Efrem correct? Explain.

Question 42

Discount Stores,Inc. ,borrows $5,000 each from EZ Loan Corporation,First National Bank,and Great Products Corporation.Discount uses its "present inventory and any thereafter acquired" to secure the loans from EZ Loan and First National.EZ Loan perfects its interest on April 1,fol?lowed by First National on April 5.Discount buys new inventory on April 10 from Great Products and signs a security agreement,giving Great Products a purchase-money security interest in the new inven?tory.On the same day,Great Products perfects its interest and notifies EZ Loan and First National.Discount takes possession of the new inven?tory on April 15.On April 20,Discount defaults on all of the loans.Whose security interest has priority?