Question 1

A purchaser of a house who buys the property "subject to" the mortgage is not personally liable for the mortgage, nor is he a surety for the mortgage obligation.

Accepted Answer

A) True 
 B)False

Question 2

"Perfection" is required in order for the secured party to enforce rights against the debtor.

Accepted Answer

A) True 
 B)False

Question 3

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt, what are Gloria's rights against Elmer?

Accepted Answer

The answer of Elmer agreed to act as the conditional...

Question 4

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

Accepted Answer

A) True 
 B)False

Question 5

According to the UCC, a computer purchased by a CPA for use in her office will be classified as inventory.

Accepted Answer

A) True 
 B)False

Question 6

First Bank loaned $100,000 to Central Office Supply Store to purchase computers for its inventory.Central signed a financing agreement, which First Bank duly filed in the appropriate public office.Lynn came into Central's store and purchased a computer that was subject to the security interest held by First Bank.Assuming that Lynn is a buyer in the ordinary course of business, whose interest in the computer has priority?

Accepted Answer

The answer of First Bank loaned $100,000 to Central Office...

Question 7

If Sharpe Finance Co.has a secured interest in Jeff's car and Jeff is in default, in most states, Sharpe may take the car from in front of Jeff's house without getting a court order.

Accepted Answer

A) True 
 B)False

Question 8

A bankruptcy trustee may invalidate a granting of a security interest from the debtor if it was made on the date of or within 90 days before the filing of the bankruptcy petition and it was for the benefit of a creditor for an antecedent debt and was made before the debtor became insolvent.

Accepted Answer

A) True 
 B)False

Question 9

Upon paying the principal debtor's entire obligation, the surety is __________ the rights of the creditor.

Accepted Answer

A)  set off by 
B)  subject to 
C)  subrogated to 
D)  exonerated by

Question 10

In states which have adopted certificate of title statutes for automobiles, trailers, mobile homes, and boats, perfection of a security interest must include both filing of a financing statement and notation on the certificate of title.

Accepted Answer

A) True 
 B)False

Question 11

What party(ies) is/are involved in a suretyship relationship?

Accepted Answer

A)  An ancillary bailee. 
B)  Principal bailee. 
C)  The principal debtor. 
D)  All of these.

Question 12

Stanmore Corporation obtains from Southwell Manufacturing a line of credit of $50,000 to help set up a new distribution center.   Stanmore initially uses $17,000 for purchase of inventory.Southwell only has a security interest in the inventory that covers that initial $17,000 advance.

Accepted Answer

A) True 
 B)False

Question 13

The Code's classifications of collateral according to nature are: (a) goods; (b) tangibles; and (c) dispensable paper.

Accepted Answer

A) True 
 B)False

Question 14

Two or more sureties bound for the same debt of a principal debtor are known as:

Accepted Answer

A)  cosureties. 
B)  conditional guarantors of collection. 
C)  absolute sureties. 
D)  co-creditors.

Question 15

Thomas borrowed $100,000 from First Bank, which asked that he both put up collateral and provide a surety.Consequently Thomas provided the bank with a security interest in his antique car collection and asked Victor to act as a surety.Victor agreed to do so and signed a surety agreement with the bank.Thomas made several payments on the loan and then asked First Bank for permission to sell three of his cars.First Bank agreed, but it never notified Victor of the sale of the collateral.Thomas then defaults on the loan.First Bank now wants Victor to pay the remainder of the loan.Must Victor pay? Explain.

Accepted Answer

The answer of Thomas borrowed $100,000 from First Bank, which...

Question 16

Explain how the 1998 Revisions to Article 9 facilitate electronic filing of a financing statement.

Accepted Answer

The answer of Explain how the 1998 Revisions to Article...

Question 17

A security interest is ineffective against the debtor until it "attaches."

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true?

Accepted Answer

A)  A security agreement may create or provide for a security interest in property that the debtor presently does not own or have rights to. 
B)  Obligations covered by a security agreement may not include future advances. 
C)  Encryption of a record cannot serve as a debtor's authentication of a security agreement. 
D)  Federal regulation allows a credit seller or lender to obtain a nonpossessory security interest in a consumer's household goods, such as furniture, appliances, and clothing, whether as a purchase money security interest or otherwise.

Question 19

The right of a surety who has paid the creditor to be repaid by the principal debtor is:

Accepted Answer

A)  reimbursement. 
B)  subrogation. 
C)  exoneration. 
D)  None of these.

Question 20

The creditor's rights against the principal debtor are determined by the contract between them.

Accepted Answer

A) True 
 B)False

Exam 37: Secured Transactions and Suretyship

A purchaser of a house who buys the property "subject to" the mortgage is not personally liable for the mortgage, nor is he a surety for the mortgage obligation.

"Perfection" is required in order for the secured party to enforce rights against the debtor.

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt, what are Gloria's rights against Elmer?

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

According to the UCC, a computer purchased by a CPA for use in her office will be classified as inventory.

If Sharpe Finance Co.has a secured interest in Jeff's car and Jeff is in default, in most states, Sharpe may take the car from in front of Jeff's house without getting a court order.

A bankruptcy trustee may invalidate a granting of a security interest from the debtor if it was made on the date of or within 90 days before the filing of the bankruptcy petition and it was for the benefit of a creditor for an antecedent debt and was made before the debtor became insolvent.

Upon paying the principal debtor's entire obligation, the surety is __________ the rights of the creditor.

In states which have adopted certificate of title statutes for automobiles, trailers, mobile homes, and boats, perfection of a security interest must include both filing of a financing statement and notation on the certificate of title.

What party(ies) is/are involved in a suretyship relationship?

Stanmore Corporation obtains from Southwell Manufacturing a line of credit of $50,000 to help set up a new distribution center. Stanmore initially uses $17,000 for purchase of inventory.Southwell only has a security interest in the inventory that covers that initial $17,000 advance.

The Code's classifications of collateral according to nature are: (a) goods; (b) tangibles; and (c) dispensable paper.

Two or more sureties bound for the same debt of a principal debtor are known as:

Explain how the 1998 Revisions to Article 9 facilitate electronic filing of a financing statement.

A security interest is ineffective against the debtor until it "attaches."

Which of the following is true?

The right of a surety who has paid the creditor to be repaid by the principal debtor is:

The creditor's rights against the principal debtor are determined by the contract between them.