Deck 34: Secured Transactions in Personal Property

Question 1

The property that is subject to the security interest is called collateral.

Answer 1

True

Question 2

A security interest is a property right that enables the creditor to take possession of the property if the debtor does not pay the amount owed.

Answer 2

True

Question 3

Claim in a changing or shifting stock of the buyer's goods is known as a floating lien.

Answer 3

True

Question 4

In a security agreement,the creditor and the debtor agree that the creditor has a security interest.

Question 5

Consumer goods are classified into different categories based on the debtor's intended use,not the physical characteristics of the goods.

Question 6

For a security interest to attach,the creditor must file a financing statement.

Question 7

Collateral may change its form and character during the course of a security agreement.

Question 8

Consumer goods are not subject to perfection of a security interest.

Question 9

A security interest gives a creditor the same protection than is afforded by a right to sue on the debt.

Question 10

Perfection can occur merely by possession of the collateral by the creditor.

Question 11

A security agreement must be backed by a written record even if the creditor has possession of the collateral.

Question 12

When a consumer gives a creditor a security interest in forthcoming health insurance proceeds,the creditor must file a statement with the insurance company in order to have a perfected security interest.

Question 13

Attachment provides creditors with rights.

Question 14

A security agreement need not describe the collateral involved.

Question 15

Grund,a night club performer,financed the purchase of a drum set to be used in his night club act.The collateral is classified as a consumer good.

Question 16

Creditors cannot legally request collateral on a previously unsecured loan.

Question 17

A debtor must have rights in the collateral for a security interest to attach.

Question 18

A security interest needs to be perfected,whether or not there are competing claims for the collateral.

Question 19

An after-acquired property clause in a consumer security agreement can cover only goods acquired by the debtor within thirty (30)days after the creditor gave value to the debtor.

Question 20

When a security interest in property is inferior to other interests and claims to the property,it is said to be perfected.

Question 21

The concept of perfection concerns:

A) the creation of the security interest.
B) protection against the claims of others to the collateral.
C) the rights of the creditor against the debtor.
D) converting unsecured creditors into secured creditors.

Question 22

Whatever is received upon the sale,exchange,collection or other disposition of collateral is known as:

A) goods.
B) paper.
C) proceeds.
D) security interest.

Question 23

_______ occurs when a bank is able to require the debtor account holder to clear all transactions in that account.

A) Control
B) Perfection.
C) Termination
D) Redemption

Question 24

Self-help repossession of collateral upon a buyer's default is contrary to public policy and never is allowed.

Question 25

Which is not an element of attachment?

A) the filing of a financing statement
B) a security agreement
C) value received by the debtor
D) the debtor has rights in the collateral

Question 26

Generally,a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.

Question 27

An interest in personal property or fixtures that secures payment or performance of an obligation is called a:

A) guaranty holding.
B) security interest.
C) guaranty interest.
D) good-faith guaranty.

Question 28

A security agreement must:

A) identify the parties involved.
B) contain a reasonable description of the collateral.
C) demonstrate that the parties intended for the creditor intends to have a security interest.
D) all of the above.

Question 29

Upon the debtor's default,the creditor may sell the collateral at a public or private sale,or lease it to a third party.

Question 30

If two creditors have a security interest in the same collateral,their priority is determined according to the "last in-first out" provision.

Question 31

If the collateral is in the possession of the creditor:

A) a financing statement must be filed to perfect the interest.
B) the security interest is perfected.
C) only a security interest has been obtained.
D) the type of goods will determine the method of perfection.

Question 32

Under Revised UCC Article 9,a debtor may authorize a financing statement by acquiring the collateral that is subject to the security agreement.

Question 33

Under Revised UCC Article 9,a financing statement must be signed by the debtor.

Question 34

The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a termination statement by the creditor and the presentation of the statement to the filing officer,who marks the record "terminated."

Question 35

A security interest that is effective against third persons as well as against the buyer is called a:

A) universal security interest.
B) prohibitive security interest.
C) perfected security interest.
D) protective security interest.

Question 36

A buyer who buys goods from a debtor in the ordinary course of business is subject to a creditor's security interest but only if the interest was perfected and the buyer had notice of it.

Question 37

Perfection of a security interest takes place:

A) upon the creditor's possession of the collateral.
B) upon attachment in the case of a purchase money security interest in consumer goods.
C) upon the filing of a financing statement.
D) all of the above.

Question 38

When a seller sells on credit and is given a security interest in the goods,that interest is called:

A) a purchase money security interest.
B) a future transaction.
C) a floating lien.
D) none of the above.

Question 39

A debtor may redeem collateral at any time prior to the time that the secured party has disposed of the collateral or entered into a binding contract for resale by tendering the entire obligation that is owed plus any legal costs and expenses incurred by the secured party.

Question 40

Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral.

Question 41

The perfection obtained by filing a financing statement lasts for __________.

A) five (5)years,and is renewable.
B) five (5)years,and is non-renewable.
C) ten (10)years,and is renewable.
D) ten (10)years,and is non-renewable.

Question 42

A financing statement must provide:

A) the name of the debtor.
B) the name of the secured party or their representative.
C) the covered collateral.
D) all of the above.

Question 43

Upon a default by a buyer,the secured seller may resell the collateral:

A) not less than three (3)months after the buyer's default.
B) not less than six (6)months after the buyer's default.
C) only at a public sale.
D) at either a public or a private sale.

Question 44

Mark purchased a very expensive automobile on credit.Within a week,Mark discovered that a tune-up was necessary,for he was in the habit of driving at an excessive rate of speed.When the car was repaired,the bill was more than $1,000.Mark does not have the money to pay for the car repairs or the monthly car payments.The credit company as well as the repair shop are concerned over who has priority of repayment.Who has priority and why?

Question 45

King Electronics,a retailer of video equipment,sold two DVRs to Larson,a psychologist,for use in her professional practice,which was located in her home.The sale to Larson was made on credit.King retained a security interest in the DVRs sold but did not file a financing statement.Mills,another creditor of Larson,has asserted that his lien on the two DVRs is superior to King's security interest.Is he right? As you decide,remember to classify the DVRs as collateral in the hands of King and Larson.

Question 46

When a state statute requires a security interest in a motor vehicle to be noted on the certificate of title,the security interest is perfected:

A) by the certificate notation,when a non-inventory motor vehicle is involved.
B) by filing under the UCC,regardless of how the vehicle is classified.
C) by filing under the UCC,when the motor vehicle is inventory.
D) either by the certificate notation or by a UCC filing,depending on how the state statute defines the term motor vehicle.

Question 47

When the filing of a financing statement is defective:

A) the security interest is lost.
B) the filing fails to perfect the security interest.
C) the security interest is perfected through the court's application of equitable principles.
D) the public notice of the creditor's interest is still effective.

Question 48

Morris made two purchases.He purchased his neighbor Cordelia's typewriter and a computer from Crazy Computers.Regarding the typewriter,Cordelia had bought it on credit from Jack's Typewriters.Cordelia had financed the purchase with Jack's and signed a promissory note and a security agreement covering the purchase.The creditor,Jack's,did not file a financing statement,relying on the concept of automatic perfection for purchase money security interests in consumer goods.Morris was unaware of the history of the typewriter.The computer was subject to a security interest in favor of Country Bank,which had perfected its security interest by filing.Morris,by coincidence,knew of this security interest when Morris purchased the computer.Unfortunately,neither Cordelia nor Crazy Computers paid the secured creditors who now seek to repossess the collateral from Morris.What will be the likely outcome of this case?

Question 49

When there are two perfected secured creditors in the same collateral:

A) priority goes to the creditor who perfected first.
B) priority goes to the creditor who is owed the greatest amount of money.
C) each perfected secured creditor has a 50% interest in the collateral.
D) Both perfected secured creditors are treated like unsecured creditors in regards to the collateral.

Question 50

If a breach of the peace might occur:

A) self-help repossession is the only option available to obtain the collateral.
B) the creditor must use court action to obtain the collateral.
C) the creditor is barred from repossessing the collateral.
D) the collateral reverts to the debtor.

Question 51

A(n)__________ statement is a document,which may be requested by a paid-up debtor,stating that a security interest is no longer claimed under the specified financing statement.

A) execution
B) discharge
C) termination
D) hold harmless

Question 52

In most states,__________ provides that a security interest in a non-inventory motor vehicle must be noted on the vehicle title registration.

A) a non-Code statute
B) UCC Article 2
C) UCC Article 9
D) judicial precedent

Question 53

What is the purpose of a financing statement?

A) to meet UCC accounting requirements under Article 9
B) to create a security interest
C) to amend a security agreement
D) to alert third persons that a creditor has a security interest in the collateral described