Deck 20: Creditors Rights and Bankruptcy

Question 1

Liens usually do not take priority over other claims against the same property.

Answer 1

False

Question 2

An artisan's lien is a security device created at statutory law through which a creditor can recover payment for labor and materials used to increase the value of real property.

Answer 2

False

Question 3

A creditor's composition agreement may be entirely enforceable.

Answer 3

True

Question 4

An artisan's lien is effective only if a creditor has possession of the property.

Question 5

Certain types of property are exempt from writs of execution or attachment.

Question 6

A creditor must exhaust all legal remedies against the principal debtor before holding the surety responsible for payment.

Question 7

A fixed-rate mortgage has a rate of interest that changes periodically.

Question 8

In some states,a judgment creditor must obtain a separate order of gar-nishment to cover each of the debtor's pay periods.

Question 9

A writ of execution is a writ that puts in force a court decree or judgment.

Question 10

A mechanic's lien can be enforced to obtain payment for work that adds value to real property.

Question 11

Foreclosure is the legal process by which a lender repossesses and auctions off property that has secured a loan.

Question 12

To use attachment as a remedy,a creditor must have an enforceable right to payment of the debt.

Question 13

Creditors can agree with a debtor to discharge the debtor's debts on payment of a sum less than that owed.

Question 14

A lien is an encumbrance on property to satisfy a debt or protect a claim for the payment of a debt.

Question 15

A material change in a loan contract between a creditor and a debtor dis-charges a surety only to the extent that the surety suffers a loss.

Question 16

A surety can assert the debtor's bankruptcy as a defense.

Question 17

Once a writ of execution has been issued,the debtor cannot pay the judgment and redeem the property until aftera sale has taken place.

Question 18

A guarantor is secondarily liable on an obliga-tion.

Question 19

A mechanic's lien is possessory.

Question 20

A surety can never assert fraud as a defense.

Question 21

One goal of bankruptcy law is to protect a debtor.

Question 22

The filing of a petition for bankruptcy will automatically stay most legal actions against the debtor.

Question 23

A court awards a judgment to Alice,who is the creditor,against Ada,who is the debtor.After the judgment,Alice requests a court order to seize Ada's property to ensure that the judgment will be collectible.This is

A)a judicial lien.
B)a writ of attachment.
C)a writ of execution.
D)aviolation of most state laws.

Question 24

Friendly Credit Corporation (FCC) believes that Gary may dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment.FCC may ask a court to issue a writ of

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

Question 25

In order of priority,the claims of all unsecured creditors in a class must be satisfied before any re-maining amounts can be distributed to the next class.

Question 26

An order for relief in a bankruptcy proceeding amounts to a discharge of the debts of the party petitioning for bankruptcy protection.

Question 27

Once a discharge is granted,it may not be revoked,even if,for example,a debtor concealed property to defraud a creditor.

Question 28

A trustee has the power to avoid a sale of the debtor's property.

Question 29

In most states,state law determines the amount of a debtor's property that is exempt from dis-tribution on bankruptcy.

Question 30

Concealing assets from a bankruptcy court is a crime.

Question 31

Ronald's debt to Greg is past due.Ronald obtains a judgment against Greg to collect the debt,but Greg will not pay.Ronald requests a writ of execution.The property that is seized under the writ of execution must be

A)in Ronald's possession.
B)inGreg's possession.
C)in the possession of Greg's employer or other third party.
D)located within the court's geographic jurisdiction.

Question 32

Before filing for bankruptcy,a consumer-debtor must receive credit counseling.

Question 33

A student loan is discharged under Chapter 13 unless the creditor can show "undue hardship."

Question 34

A Chapter 11 reorganization plan must provide for payment of tax claims over a five-year period.

Question 35

Michael contracts with Jill to fix the brakes on her Honda Civic.Jill leaves her car with Michael,but refuses to pay when the work is done.Michael refuses to return the car until she pays.Michael's lien on Jill's car will end

A)inthirty days.
B)insixty days.
C)when Michael voluntarily surrenders possession of the car.
D)when Jill obtains a court order requiring Michael to return the car.

Question 36

Bankruptcy law is state law.

Question 37

Child-support debts will be suspended by a voluntary bankruptcy filing.

Question 38

Some student loans are dischargeable in a Chapter 7 bankruptcy.

Question 39

Portia owes Bon $500 on their contract,but refuses to pay.To collect,Bon files a me-chanic's lien,under which security for the debt is repre-sented by

A)Portia's personal property.
B)Portia's real estate.
C)the $500 owed under the contract.
D)the contract.

Question 40

A discharge will be denied to a debtor who received a discharge within eight years of filing the current petition.

Question 41

Consumer Credit,Inc.(CCI),lends $1,000 to Joe.Kay acts as Joe's surety.If Kay pays the loan,she gets

A)any right that CCI had against Joe,but not a right to be reimbursed by Joe.
B)a right to be reimbursed by Joe,but not any right that CCI had against Joe.
C)any right that CCI had against Joe and a right to be reimbursed by Joe.
D)none of the choices.

Question 42

Bess wishes to appeal a decision from a federal bankruptcy court.Bess must appeal to

A)a county court.
B)a federal district court.
C)the U.S.Supreme Court.
D)a state court.

Question 43

Drew and Earl are brothers.They agree to act as guarantors on a loan made by their sister,Flo.Flo defaults on the payments and Drew re-fuses to pay.Earl pays the debt.Earl can recover from

A)Drew and Flo under the right of proportionate liability.
B)Drew and Flo under the right of reimbursement.
C)Drew under the right of contribution and Flo under the right of subrogation.
D)no one,because the parties are brothers and sister.

Question 44

Joe files a voluntary petition for Chapter 7 bankruptcy.His petition does not need to include

A)a list of Joe's secured creditors.
B)a list of Joe's unsecured creditors.
C)a list of the occupations of all Joe's creditors.
D)the addresses of all Joe's creditors.

Question 45

Fact Pattern 20-1 (Questions 12-15 apply)?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 20-1.Nina may recover

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

Question 46

Fact Pattern 20-1 (Questions 12-15 apply)?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 20-1.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 47

Muffins-2-Go buys a truck from Street Vehicles,Inc.,under a contract signed by Riley,Muffins-2-Go's president,making him personally liable if Muffins-2-Go does not pay the loan.Riley is

A)a guarantor.
B)a surety.
C)a co-surety.
D)a co-creditor.

Question 48

Maggie is a surety for Juli's debt to Bill.Bill and Juli decide to make material changes to the original contract without consulting Maggie.Maggie is

A)still bound by the contract.
B)discharged completely.
C)still bound by the contract,but allowed to make additional changes to the contract.
D)still bound by the contract unless she contests it within 30 days of the changes.

Question 49

Daphne defaults on a debt to Country Loan Corporation (CLC).As a creditor,CLC can place liens on all of Daphne's property except

A)motor vehicles used to commute to work.
B)stock in various corporations.
C)items that the debtor selects.
D)vacant commercial property.

Question 50

Bobby has fifteen creditors.To force Bobby into bankruptcy proceedings,at least three creditors must join the petition and their unsecured claims must add up to at least

A)$500.
B)$10,250.
C)$14,425.
D)$50,000.

Question 51

Wilson wants to file an ordinary,or straight,bankruptcy.Wilson should file using

A)Chapter 7.
B)Chapter 11.
C)Chapter 13.
D)his state's bankruptcy code.

Question 52

Fact Pattern 20-1 (Questions 12-15 apply)?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 20-1.Mary will receive

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

Question 53

Roland files for Chapter 7 bankruptcy.After all his assets have been sold and the proceeds distributed among his creditors,Roland's remaining debts

A)are discharged.
B)paid by the court.
C)must be paid by Roland.
D)are put on hold until Roland has sufficient means to pay them.

Question 54

Gerald files a bankruptcy petition.The resulting automatic stay will apply to Gerald's

A)alimony debts.
B)child-support debts.
C)spousal maintenance debts.
D)car payment debts.

Question 55

William is a surety for Jeannie's loan from Richard.Richard knows of William's existence.When the loan comes due,Jeannie tries to pay Richard,but Richard rejects the payment.William is

A)released from any obligation on the debt.
B)required to pay the amount of the debt to Richard.
C)required to pay up to half of the amount of the debt to Richard.
D)required to pay the amount of the debt to Jeannie.

Question 56

Denise borrows $90,000 from Clear Lake Credit Union to buy a home.Denise loses her job and fails to make payments on the mortgage,but assures Clear Lake Credit that she will soon secure a new job.The lender agrees to postpone the payments.This is

A)a right of redemption.
B)aforbearance.
C)a short sale.
D)a workout agreement.

Question 57

Fact Pattern 20-1 (Questions 12-15 apply)?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 20-1.Other property Mary may own that may be ex-empt from satisfaction of judgment debts includes

A)any property that Mary wishes to exempt.
B)investments that Mary has made in her family's businesses.
C)recreational vehicles that Mary uses on weekends.
D)tools that Mary uses in her trade.

Question 58

Thirty-one days before filing a petition in bankruptcy,Dee transfers prop-erty and makes payments that favor one creditor over another.These are

A)affirmation agreements.
B)preferences.
C)secured interests.
D)unsecured debts.

Question 59

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors.If,after the loan agreement is signed,Dina agrees to a higher rate of interest without telling Edie,then Edie is

A)discharged from the agreement.
B)liable at the higher rate of interest.
C)liable at the lower rate of interest.
D)liable for the principal only.

Question 60

Donna goes through an involuntary bankruptcy proceeding.An invol-un-tary bankruptcy occurs when

A)a debtor files forms designated for the purpose in a bankruptcy court.
B)a debtor is unable to pay his or her debts as they come due.
C)a debtor's creditors force the debtor into bankruptcy proceedings.
D)a debtor's debts exceed the fair market value of his or her assets.

Question 61

Zeke files a petition for bankruptcy under Chapter 13.Zeke's Chapter 13 plan must provide for

A)the turnover of his future income to the trustee.
B)his attendance at a credit-counseling briefing.
C)adequate means for the petition's execution.
D)a preference for one creditor over another.

Question 62

Dorothy files a petition for bankruptcy under Chapter 13.If she is granted a discharge,debts that will most likely be discharged include

A)claims not provided for by the plan.
B)payments on retirement accounts.
C)claims for domestic support obligations.
D)credit-card debt incurred more than one year before filing.

Question 63

Shippers Dispatch Corporation orders office equipment from Office Outfitters,Inc.,which has an unperfected security interest in the equipment until it is paid for.Meanwhile,Shippers Dispatch takes out a loan from Capital Credit,Inc.,subject to a security interest in Shippers Dispatch's building and equip-ment,which Capital perfects.Shippers Dispatch files a bankruptcy petition under Chapter 7.If the petition is granted,in what or-der will Shippers Dispatch's creditors be paid?

Question 64

Norma Jean files for Chapter 7 bankruptcy.She turns her assets over to Addie,who sells the assets and then distributes the proceeds to Norma Jean's creditors.Addie is a

A)creditor.
B)federal judge.
C)bankruptcy trustee.
D)debtor.

Question 65

A petition for a discharge in bankruptcy under Chapter 11 may be filed byA petition for a discharge in bankruptcy under Chapter 11 may be filed by

A)Reliable Insurance Company.
B)Pacific Mountain Railroad.
C)Solid State Bank.
D)Valley Credit Union.

Question 66

Lionel files a voluntary petition for bankruptcy under Chapter 7.The court will likely deny a discharge of Lionel's debts if he

A)conceals records of his financial condition with the intent to defraud a creditor.
B)does not have sufficient assets to pay all his secured creditors.
C)filed for bankruptcy twelve years ago.
D)has a criminal record.

Question 67

Anthony believes that he needs to obtain a Chapter 13 discharge in bank-ruptcy.A Chapter 13 case can be initiated by a filing of a voluntary pe-tition by

A)a creditor only.
B)a corporation only.
C)a debtor only.
D)a trustee only.

Question 68

Checkerboard Pizza,Inc.(CPI),files for bankruptcy under Chapter 11.CPI's Chapter 11 plan must contain

A)a plan to turn over its future income to the trustee.
B)a certificate proving attendance at a credit-counseling briefing.
C)a provision of adequate means for the plan's execution.
D)a statement of preference for one creditor over another.

Question 69

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?

Question 70

Ed is a debtor.Financial Loans,Inc.,and the government are Ed's credi-tors.For these parties,a bankruptcy proceeding under Chapter 13 could be initiated by the filing of a petition byEd is a debtor.Financial Loans,Inc.,and the government are Ed's credi-tors.For these parties,a bankruptcy proceeding under Chapter 13 could be initiated by the filing of a petition by

A)Ed alone or by his creditors jointly.
B)Ed only.
C)Financial Loans only.
D)the government only.

Question 71

A petition for a discharge in bankruptcy under Chapter 13 may be filed by

A)Gracie,the sole proprietor of Home Net Services.
B)Internet Portals &

Question 72

Jay files a bankruptcy petition under Chapter 7.Among his debts are un-paid taxes,fines owed to the government,student loans owed to Mega University,and support owed to his ex-wife Kris.Most likely to be dis-charged are

A)the back taxes if they accrued within the previous three years.
B)the fines if they have been outstanding less than eight years.
C)the student loans if their payment would impose undue hardship.
D)the support debts.