Deck 27: Secured Transactions and Electronic Filing

Question 1

Unless otherwise agreed,a security agreement automatically gives the creditor rights in the proceeds of the collateral.

Answer 1

True

Question 2

A three-party secured transaction happens when a seller sells goods to a buyer who has obtained financing from a third-party lender that takes a security interest in the goods sold.

Answer 2

True

Question 3

A security interest may not be created in chattel paper.

Answer 3

False

Question 4

Article 9 of the UCC governs secured transactions in personal property.

Question 5

The secured party in a secured transaction is usually a lender.

Question 6

A security agreement cannot cover after-acquired property of the debtor.

Question 7

Perfection is necessary in order for a creditor to have a valid security interest.

Question 8

If a debtor who purchases an item with unsecured credit defaults on the loan,the creditor's only means of recourse is to sue the debtor to try to recover the unpaid loan amount.

Question 9

When filing is required to perfect a security agreement,the security agreement must be filed.

Question 10

After-acquired property is property that the debtor acquires after the security agreement is executed.

Question 11

The filing requirements for security interests can be different in the various states,but the office of the secretary of state and the county clerk's office are often where the filing is to be made.

Question 12

A security interest can attach to the property prior to the debtor having an interest in the property.

Question 13

The debtor in a secured transaction is in most cases the owner of the collateral.

Question 14

A security interest must be in writing unless the creditor has possession of the collateral.

Question 15

Checks,notes,stocks,and bonds can all be subject to a security interest.

Question 16

Financing statements are effective for 5 years from the date of filing.

Question 17

Article 9 of the UCC applies to transactions involving real estate mortgages and landlord liens.

Question 18

The debtor must have a current or future legal right in or the right to possession of the collateral.

Question 19

A financing statement covering fixtures is called a blanket filing.

Question 20

Ownership or possessory rights to property have no bearing on the security interest being given.

Question 21

A termination statement is filed by the debtor when a secured debt is paid off.

Question 22

When the creditor repossesses the collateral,the creditor always retains the right to keep the collateral rather than sell it to satisfy the debt.

Question 23

More than one creditor can have a perfected security interest in the same collateral.

Question 24

A perfected security interest will take priority over an unperfected security interest even if the unperfected security interest attached first.

Question 25

A security interest can be perfected merely by possession of the collateral by the secured party.

Question 26

A purchase money security interest in a motor vehicle is covered by the automatic perfection rule.

Question 27

The automatic perfection rule applies only to a purchase money security interest in consumer goods.

Question 28

A purchase money security interest automatically perfects the creditor's security interest at the time of sale.

Question 29

The parties are free to define the term "default" in their security agreement.

Question 30

A secured party may cure a default by taking possession of the debtor's collateral.

Question 31

If an affected secured party fails to file or send a termination statement as required,he or she is liable to the debtor for $1,000.

Question 32

A secured party may sell,lease,or otherwise dispose of collateral.

Question 33

Under no circumstance may a secured creditor repossess and retain the debtor's collateral in satisfaction of the debtor's obligation.

Question 34

A certificate of filing indicates whether there are any currently effective financing statements naming a particular individual as the debtor.

Question 35

A financing statement can be filed regardless of a creditor's physical possession of the collateral.

Question 36

A termination statement must be filed within 20 days of receipt of a debtor's written demand or within 1 month of the debt being paid,whichever comes first.

Question 37

A buyer in the ordinary course of business is a person who,with knowledge of another's ownership or security interest in goods buys the goods,in the ordinary course of business from a person in the business of selling goods of that kind.

Question 38

Once a secured consumer debt is paid,the secured party must file a termination statement.

Question 39

If a sale of collateral produces any surplus funds after paying expenses and the underlying debt,the debtor is entitled to the surplus.

Question 40

A "buyer in the ordinary course of business" who purchases goods from a merchant takes those goods free of any perfected or unperfected security interest in that merchant's inventory.

Question 41

Which of the following is not personal property?

A) motor vehicles
B) jewelry
C) stock certificates
D) condominiums
E) copyrights

Question 42

Which of the following elements must exist for there to be a valid,enforceable security agreement?

A) a written security agreement
B) the creditor must give value to the debtor
C) the debtor must have an interest in the collateral
D) A,B,and C
E) B and C only

Question 43

Which of the following is not one of the general categories of goods subject to a security interest under Article 9 of the UCC?

A) consumer goods
B) equipment
C) building materials
D) farm products
E) inventory

Question 44

If the proceeds from the disposition of the debtor's collateral are insufficient to satisfy the debt to the secured party,the debtor is personally liable to the secured party for the deficiency.

Question 45

Which of the following statements is false?

A) If an attachment occurs,there is a valid security interest between the debtor and the creditor.
B) Perfection is required to protect the security interest against the claims of third parties.
C) Some third parties have preference over the holders of perfected security interests.
D) Some security interests are automatically perfected.
E) There must always be a written agreement for attachment.

Question 46

Secured transactions usually involve:

A) one or two parties
B) one,two,or three parties
C) two or three parties
D) two,three,or four parties
E) one,two,three,or four parties

Question 47

In order to perfect a security interest by filing,which is true about the items to be filed?

A) In all cases,the financing statement must be filed.
B) In all cases,the security agreement must be filed.
C) In all cases,both the financing statement and the security agreement must be filed.
D) In all cases,the financing statement and underlying loan agreement must be filed.
E) In all cases,the financing statement must be filed,except that the security agreement can be substituted for the financing statement if desired.

Question 48

Article 9 of the UCC does not cover a security interest in the following:

A) land
B) inventory
C) equipment
D) patents and copyrights

Question 49

Which of the following is true about attachment and perfection of security interests?

A) A security interest may be either attached or perfected,but not both.
B) A security interest must be perfected before it can attach.
C) A security interest may be enforced by the creditor even if it has not been perfected,so long as it has attached.
D) Attachment generally gives the same rights to the secured party as perfection.

Question 50

A secured creditor may not relinquish his or her security interest in the debtor's collateral.

Question 51

A type of security interest that does not attach to a single piece of property but also covers after-acquired property and future advances is known as a:

A) temporary lien
B) fixed lien
C) transitory lien
D) floating lien

Question 52

When a valid security interest becomes effective as between debtor and creditor,it is said to:

A) terminate the debtor's interest
B) attach to the subject matter
C) become perfected
D) entitle the creditor to possession

Question 53

Which of the following occurs upon the attachment of a security interest?

A) The creditor obtains certain rights that become effective if the debtor defaults.
B) The creditor's security interest will obtain priority over all later security interests.
C) Notice is given to the world that the creditor has a security interest in the collateral.
D) Title to the collateral shifts to the creditor.
E) The creditor obtains possession of the collateral.

Question 54

Which of the following is true about security agreements and financing statements?

A) These are two terms for essentially the same document.
B) Both must be filed in order to perfect a security agreement.
C) Both must exist in order for a security interest to attach.
D) The financing statement gives constructive notice to the world of the existence of the related security agreement.
E) The security agreement is unenforceable until a financing statement has been filed.

Question 55

A security interest in a piece of equipment owned by a business would most often be perfected:

A) by filing
B) by possession
C) by an agreement to that effect between debtor and creditor
D) automatically

Question 56

Which of the following items does not need to be included in a financing statement?

A) the debtor's name
B) the debtor's mailing address
C) the secured party's name
D) a description of the collateral
E) what constitutes a default in the underlying loan agreement

Question 57

Which of the following is true about service providers' liens on personal property?

A) The liens attach with respect to any work performed on personal property that benefits the property regardless of the consent of the owner of the property.
B) They can exist only if provided for by statute.
C) Whether or not they are recorded,the lien will remain attached to the property if the debtor transfers the property to another.
D) Such a lien applies only to the reasonable value of the services provided.

Question 58

A security agreement provides that the agreement and collateral covers the current loan but also any future loans from this creditor to this debtor.This provision covers:

A) after-acquired property
B) proceeds
C) future advances
D) consumer goods
E) floating liens

Question 59

Which of the following is not generally true about artisan's and mechanic's liens?

A) They apply where one provides materials or services with respect to goods.
B) They require that the labor or materials have been provided in the ordinary course of business.
C) There must have been authorization from the owner of the goods for the work done on them.
D) The artisan or mechanic can hold the goods until the amount owed is paid,but cannot sell the goods.
E) Artisan's and mechanic's liens are super-priority liens given priority over any existing liens on the goods.

Question 60

In order for a security interest to give the secured party protection against the claims of other creditors of the debtor,the security interest must:

A) terminate the debtor's interest
B) attach to the subject matter
C) become perfected
D) entitle the creditor to possession

Question 61

A filed financing statement remains in force for a period of:

A) 5 years from the date of filing
B) 4 years from the date of filing
C) 6 months from the date of filing
D) 90 days from the date of filing

Question 62

If a security interest is perfected but thereafter becomes commingled with other goods that also have perfected security interest ultimately resulting in a product or mass and loss of identity,how does the security interest rank?

A) equally according to the ration that the cost of goods to which interest originally attached bears to the cost of the total product or mass
B) first in time
C) first to be chosen
D) there is no ranking of the security interest and a loss results
E) None of these are correct.

Question 63

Which of the following is true?

A) The creditor is generally not entitled to obtain a deficiency judgment where the collateral is goods if the sale of the goods does not cover the amount owed on the underlying debt.
B) The right of redemption for collateral extends until a reasonable time after its disposal.
C) To exercise the right of redemption,the debtor must not only pay the amount owed,but also all related costs of the creditor in connection with the repossession of the collateral.
D) Deficiency judgments are generally against public policy unless reasonable in amount.

Question 64

If one party's security interest attached in March,but has not been perfected,and another creditor's security interest attached and perfected in April,which of the following is true as of the following December?

A) The security interests have equal priority.
B) The security interest that attached in March has priority.
C) The security interest that attached in March has priority,but only if it became perfected prior to the other creditor bringing an action on the collateral.
D) The security interest that was perfected in April has priority.

Question 65

Which security interests are perfected at the moment of attachment?

A) all security interests
B) all purchase money security interests
C) all consumer good security interests
D) all consumer good purchase money security interests
E) all pledges

Question 66

Sandy purchases a piece of equipment to use in her business.The seller of the equipment extended credit to Sandy to enable her to purchase the equipment.Sandy signs a security agreement,but the seller of the equipment does not file a financing statement anywhere.Sandy defaults on the loan and the seller of the equipment wants to get possession of the equipment.Can the seller repossess the equipment?

A) No,because the equipment is not consumer goods.
B) No,because the seller did not file a financing statement.
C) Yes,because there is a valid security agreement.
D) Yes,because there is automatic perfection.

Question 67

Which of the following persons can defeat a perfected security interest?

A) a buyer in the ordinary course of business
B) certain buyers of secondhand consumer goods when a financing statement has not been filed
C) people with artisan's or mechanic's liens
D) A,B,and C
E) A and B only

Question 68

Which of the following are rules established by the UCC when determining priority among conflicting claims of creditors?

A) A secured creditor's interest is equal to an unsecured creditor's interest.
B) A perfected security interest has priority over a mere interest in the same collateral.
C) If there are two or more perfected security interest in the same collateral,the last to perfect has priority as it is the most recent interest that has been filed.
D) All of these are correct.

Question 69

A security agreement can cover:

A) property not owned at the time of the agreement,but acquired later
B) credit not owed at the time of the agreement,but acquired later
C) neither A nor B
D) both A and B

Question 70

Which of the following apply to filing of a financing statement?

A) The public may review financing statements.
B) The majority of states require financing statements pertaining to farm equipment,farm products and the like be filed with the county clerk.
C) A continuation statement may be filed up to six months before the expiration of the financing statement's five year term.
D) All of the above apply.

Question 71

Ajax Corporation borrowed $50,000 from National Bank,giving National a security interest in its factory equipment.The agreement stated that the equipment would be security for this $50,000 loan and any future loans that National made to Ajax.National filed a valid financing statement.Over the next several months,Ajax borrowed another $100,000 from National.No additional financing statements were filed.Ajax has not made any payments on its loans from National.Ajax defaults on these loans.National wants to foreclose on the collateral.Assuming this security agreement is valid and perfected,how much of National's debt is secured?

A) None,because this was not a purchase money situation.
B) Only the first $50,000 because financing statements were not filed on the last $100,000.
C) Only the first $50,000 because future advances clauses are not valid.
D) The entire $150,000 is secured.

Question 72

Which of the following is true about when perfection and attachment occur?

A) Either can occur before the other.
B) They always occur simultaneously.
C) Attachment cannot occur until there has been perfection.
D) Attachment must occur before or at the same time as perfection.
E) There can only be one attached and one perfected security interest in a given piece of collateral.

Question 73

A creditor who has repossessed collateral may choose to retain it:

A) in all circumstances
B) in all circumstances unless the secured party receives an appropriate notice within 20 days
C) in all circumstances when the debtor willfully did not pay the debt
D) in all circumstances unless the secured party receives an appropriate notice within 20 days or in the case of consumer goods,if more than 60 percent of the price has been paid

Question 74

Pat went to Eighth National Bank in Oregon and obtained a loan to purchase a computer from a friend.Pat signed a security agreement granting the bank a security interest in the computer.Pat planned to use this computer in his home-based publishing business.The bank gave Pat $2,500 to use in purchasing the computer.However,Pat immediately went to Las Vegas without purchasing the computer and has not been seen since.The bank has filed a financing statement covering the computer.The bank wants the computer.Can the bank get the computer?

A) Yes,because the computer is equipment.
B) Yes,so long as no one else had an earlier perfected security interest in the computer.
C) No,because Pat is no longer in the state of Oregon.
D) No,because the security interest has not attached yet.
E) No,because the bank must first try to collect from Pat.

Question 75

Under Article 9 of the UCC,"protection of the buyers of goods" means that which of the following is true?

A) A buyer in the ordinary course of business takes free of any security interest.
B) The buyer can never take title to goods.
C) Buyers can return nonconforming goods.
D) Goods must be delivered to a common carrier in order for title to pass.

Question 76

Which of the following would relieve a creditor of filing a financing statement?

A) by filing previous filing statements with the appropriate government office
B) an agreement with the debtor that the creditor will not file a financing statement
C) by the creditor taking physical possession of the collateral
D) by filing an exemption for noncompliance of filing a financing statement

Question 77

Under Article 9 of the UCC,whatever is received upon the sale,exchange,collection,or other disposition of collateral,is classified as:

A) proceeds
B) goods
C) documents
D) value

Question 78

Which of the following statements is false?

A) If the proceeds from the sale of the collateral do not pay the underlying debt,the creditor may obtain a deficiency judgment against the debtor.
B) If the proceeds from the sale of the collateral are more than the underlying debt and expenses,the debtor has a right to the excess.
C) Generally,the debtor has a right of redemption as to the collateral.
D) In all cases,the creditor has the right to retain the collateral.

Question 79

A secondhand buyer of consumer goods that were subject to a purchase money security interest in the hands of the original buyer takes those goods free of the purchase money security interest:

A) under no circumstances
B) so long as the original creditor perfected by automatic perfection
C) so long as the original creditor perfected by filing a financing statement
D) if the original creditor did not file a financing statement and the secondhand buyer does not have actual or constructive notice of the security interest
E) in all circumstances

Question 80

Generally,if two creditors have perfected security interests in the same collateral,only one of which is a purchase money security interest,which has the superior right (priority),assuming all notice is properly given within the appropriate time periods?

A) the first to perfect
B) the first to attach
C) the purchase money security interest
D) they have equal priority