Deck 19: Secured Transactions and Bankruptcy

Question 1

Under the Uniform Commercial Code,a buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods unless the security interest is perfected.

Answer 1

False
Explanation: According to Uniform Commercial Code Section 9-320(a),a buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods even if the security interest is perfected.

Question 2

Under the Uniform Commercial Code,a secured interest is an interest in personal property or fixtures which secures payment or performance of an obligation.

Answer 2

True
Explanation: Under the Uniform Commercial Code,a secured interest is an interest in personal property or fixtures that secures payment or performance of an obligation.Suppose,for example,that Best Buy sells you a laptop on credit.Best Buy retains a secured interest in the laptop,which means that the store can repossess the laptop if you fail to make payments.

Question 3

Perfection of a security interest in a motor vehicle generally occurs when the secured party files a financing statement with the Federal Trade Commission (FTC).

Answer 3

False
Explanation: Perfection of a security interest in a motor vehicle occurs when a notation of the secured interest is made on the certificate of title.

Question 4

Under the Uniform Commercial Code,the secured party's interest in proceeds lasts for sixty days after the debtor receives the proceeds.

Question 5

According to the Uniform Commercial Code,a secured party need not give value in order to create a security interest.

Question 6

A purchase-money security interest (PMSI)is formed when a debtor uses borrowed money from an unsecured party to buy the collateral.

Question 7

When a debtor sells collateral,the secured party automatically has an interest in the proceeds the debtor receives in exchange for the collateral.

Question 8

In a dispute between a secured perfected creditor and a secured unperfected creditor for claim to collateral,the secured perfected creditor would be the prevailing party.

Question 9

When a creditor sells a consumer good to a debtor on a credit basis or a creditor extends a loan to a debtor for the purchase of a consumer goods,the security interest does not perfect automatically; instead,the secured party must file a financing statement in order for the security interest to perfect.

Question 10

Bankruptcy remedies are available to individuals and corporations,but not to partnerships.

Question 11

Article 2(A)of the Uniform Commercial Code governs secured transactions in personal property.

Question 12

The Uniform Commercial Code does not define loan default.

Question 13

The security agreement must be signed by the debtor and describe the collateral.

Question 14

In general,secured parties have priority over unsecured creditors.

Question 15

Collateral is the property that is subject to a security interest.

Question 16

The least common way to perfect an interest is to file a financing statement with a state agency.

Question 17

Chattel paper is a writing that indicates both a monetary obligation and a security interest in specific goods.

Question 18

A security interest may not apply to personal property that is not yet in the debtor's possession.

Question 19

Perfection is a series of legal steps a secured party takes to protect its right in the collateral from other creditors who want their debts satisfied through different collateral.

Question 20

A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property the debtor owns.

Question 21

The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)of 2005 included only minor changes to bankruptcy law.

Question 22

An agreement in which the debtor gives a secured interest to the secured party is a(n)________.

A)collateral contract
B)novation
C)accord and satisfaction
D)debenture
E)security agreement

Question 23

If the debtor made any payments within one year of the bankruptcy filing,the bankruptcy trustee can examine these payments as preferential payments.

Question 24

If a party completes a Chapter 7 bankruptcy,the party is not permitted to seek a Chapter 7 bankruptcy again for three years.

Question 25

The person or party that holds the interest in the secured property is the ________.

A)subrogee
B)assignee
C)delegatee
D)secured party
E)third-party beneficiary

Question 26

Which of the following are a type of indispensable paper?

A)Fixtures
B)Documents of title
C)Accounts
D)Fixtures,documents of title,and accounts
E)Fixtures and documents of title,but not accounts

Question 27

Which of the following articles of the Uniform Commercial Code governs secured transactions in personal property?

A)Article 1
B)Article 4
C)Article 5
D)Article 7
E)Article 9

Question 28

Which of the following are examples of collateral?

A)Goods and indispensable paper
B)Goods and intangibles
C)Goods and proceeds
D)Goods,indispensable paper,and proceeds
E)Goods,indispensable paper,intangibles,and proceeds

Question 29

Creditors can attempt to repossess property during bankruptcy proceedings.

Question 30

A(n)________ is the person or party that has an obligation to the secured party.

A)assignor
B)debtor
C)maker
D)creditor
E)delegator

Question 31

When a debtor uses borrowed money from the secured party to buy the collateral,a(n)________ interest is formed.

A)leveraged
B)third-party beneficiary
C)purchase-money security
D)incidental beneficiary
E)perfected security

Question 32

Bankruptcy law is state law.

Question 33

Which of the following are examples of goods?

A)Consumer goods
B)Farm products
C)Documents of title
D)Consumer goods,farm products,and documents of title
E)Consumer goods and farm products,but not documents of title

Question 34

Under Chapter 7,liquidation may be voluntary but not involuntary.

Question 35

When the creditor becomes a secured party with an interest in the collateral,________ occurs.

A)attachment
B)subrogation
C)accord and satisfaction
D)novation
E)perfection

Question 36

Collateral is the property that is subject to the security interest,and may include intangibles.Intangibles include ________.

A)accounts
B)goodwill
C)literary rights
D)accounts,goodwill,and literary rights
E)accounts and goodwill,but not literary rights

Question 37

If an individual was a debtor in a bankruptcy case that was dismissed within 180 days of the current case,the individual is generally not eligible to be a debtor under Chapters 7,11,or 13.

Question 38

A ________ transaction is a transaction in which the payment of a debt is guaranteed by the debtor's personal property owned by the debtor.

A)subrogated
B)restricted
C)secured
D)leveraged
E)certified

Question 39

Chapter 11 reorganization must be voluntary.

Question 40

An interest in personal property or fixtures which secures payment or performance of an obligation is a called a(n)________.

A)debenture
B)secured interest
C)promissory note
D)mutual-benefit bailment
E)accord and satisfaction

Question 41

Which of the following is true regarding a secured party's interest in proceeds?

A)A secured party automatically has an interest in proceeds for a limited amount of time.
B)A secured party has an interest in proceeds,but only if the secured party takes possession of the proceeds.
C)A secured party has an interest in proceeds,but only if a financing statement is filed on the proceeds.
D)A secured party has an interest in proceeds,but only if the secured party takes possession of the proceeds,or if the secured party files a financing statement on the proceeds.
E)The secured party may not acquire a security interest in proceeds unless a new agreement regarding the proceeds is reached with the debtor.

Question 42

According to the Uniform Commercial Code,a financing statement should include ________.

A)the names and addresses of all the parties involved
B)the names and addresses of all the parties involved and a description of the collateral
C)the names and addresses of all the parties involved,a description of the collateral,and the signature of the debtor
D)the name of the financing bank and the name of the debtor,and a description of the collateral
E)the name of the financing bank,the signature of the debtor,a description of the collateral,and the details of the loan repayment schedule

Question 43

According to the Uniform Commercial Code,what happens if a buyer of a consumer good subject to purchase-money security interest later sells the good?

A)The security interest immediately terminates.
B)The security interest passes to the new buyer.
C)Regardless of whether the new buyer is aware of the security interest,the security interest terminates if the sale to the buyer is made before the original secured party files a financial statement.
D)As long as the new buyer is not aware of the security interest,purchases the good for his or her personal use,and purchases the good before the secured party files a financial statement,the buyer obtains the good free of the security interest.
E)As long as the new buyer is not aware of the security interest,purchases the good for resale,and purchases the good before the secured party files a financial statement,the buyer obtains the good free of the security interest.

Question 44

Failure to make payments on a loan is ________.

A)Chapter 7 bankruptcy
B)default
C)Chapter 11 bankruptcy
D)leverage
E)Chapter 7,Chapter 11,or Chapter 13 bankruptcy

Question 45

In a dispute between two secured parties with unperfected security interests,which of the following is true?

A)The party who attached its interest first will prevail.
B)The party who attached its interest second will prevail.
C)The parties must divide the proceeds evenly between them.
D)The party who loaned the most money on the collateral has priority.
E)The party who loaned the least money on the collateral has priority.

Question 46

The transfer of collateral to a secured party for the purpose of perfection is called a(n)________.

A)sole-benefit bailment
B)pledge
C)entrustment
D)allonge
E)allocation

Question 47

What type of collateral must be perfected through possession?

A)Certificates of deposit
B)Stocks
C)Bonds
D)Certificates of deposit,stocks,and bonds
E)No types of collateral must be perfected through possession

Question 48

A secured party's interest in proceeds lasts for ________ after the debtor receives the proceeds.

A)three years
B)one year
C)180 days
D)30 days
E)10 days

Question 49

Which of the following is an amendment to a financing statement stating that the debtor has no obligation to the secured party?

A)A declaration against interest
B)A termination statement
C)An accord and satisfaction
D)A settlement agreement
E)A novation

Question 50

When a debtor sells collateral,he or she receives ________,something that is exchanged for collateral.

A)after-acquired property
B)consideration
C)proceeds
D)collateral
E)value

Question 51

What type of paper indicates both a monetary obligation and a security interest in specific goods?

A)Chattel paper
B)Service paper
C)Transactional paper
D)Commercial paper
E)Default paper

Question 52

What is the national standard for perfecting a security interest in an automobile or a boat?

A)Perfection by pledge or perfection by filing
B)Perfection by filing or perfection by possession
C)Automatic perfection or perfection by possession
D)Automatic perfection or perfection by filing
E)No national standard exists for perfecting a security interest in an automobile or a boat.

Question 53

A security interest in a trademark,copyright,or patent is perfected ________.

A)automatically
B)by filing
C)by possession
D)by filing or by possession,but not automatically
E)automatically,by filing,or by possession

Question 54

Which of the following can be considered after-acquired property?

A)Inventory
B)Livestock
C)Equipment
D)Inventory,livestock,or equipment
E)Inventory and equipment,but not livestock

Question 55

A(n)________ good is a good used or bought for use primarily for personal,family,or household purposes.

A)retail
B)consumer
C)commercial
D)intangible
E)unsecured

Question 56

A security interest in collateral that has been perfected in one state:

A)Will generally transfer to another state for a period of four months from the date that the property is brought into the state.
B)Will generally transfer to another state for a period of six months from the date that the property is brought into the state
C)Will generally transfer to another state for a period of one year from the date that the property is brought into the state
D)Will generally transfer to another state for a period of five years from the date that the property is brought into the state
E)Will not transfer to another state.

Question 57

What kind of property is acquired by the debtor after the security agreement is made?

A)Post-dated property
B)After-acquired property
C)Proceeds
D)Ex post facto property
E)Incidental property

Question 58

Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts satisfied through the same collateral?

A)Perfection
B)Procedural due process
C)Novation
D)Strategic credit management
E)Substantive due process

Question 59

Once a financing statement has been filed with the correct agency,how long is the statement valid without renewal?

A)180 days
B)1 year
C)3 years
D)5 years
E)7 years

Question 60

Which party routinely buys goods in good faith from a person who routinely sells such goods?

A)A commercial purchaser
B)A non-commercial purchaser
C)A course of dealings purchaser
D)A buyer in the ordinary course of business
E)A holder of goods in due course

Question 61

Which title of the United States Code contains the Bankruptcy Code?

A)Title 9
B)Title 11
C)Title 13
D)Title 15
E)Title 23

Question 62

Once a voluntary liquidation proceeding under Chapter 7 is filed,the debtor's prepetition assets form the ________.

A)trust corpus
B)probate estate
C)trust estate
D)bankruptcy estate
E)reversionary asset pool

Question 63

Bankruptcy remedies are available to ________.

A)Individuals only
B)individuals and corporations,but not partnerships
C)individuals and partnerships,but not corporations
D)corporations and partnerships,but not individuals
E)individuals,corporations,and partnerships

Question 64

Which of the following are ineligible for Chapter 7 bankruptcy relief?

A)Banks
B)Railroads
C)Health maintenance organizations
D)Banks,railroads,and health maintenance organizations
E)Banks and railroads,but not health maintenance organizations

Question 65

Which of the following is true regarding the manner in which a secured party may sell collateral after the debtor's default?

A)The sale must be at a private sale.
B)The sale must be at a public sale.
C)The sale may be at either a private sale or a public sale.
D)The sale must be at a "without reserve" sale.
E)The sale must be at a "with reserve" sale.

Question 66

A(n)________ takes over administration of the debtor's estate.

A)administrator
B)executor
C)committee of creditors
D)executrix
E)trustee

Question 67

If a debtor defaults,what type of court order does the secured party need to take possession of the collateral?

A)An order to take possession
B)A declaratory judgment
C)A summary judgment
D)A temporary injunction
E)The secured party does not need an order to take possession.

Question 68

Which chapter of the Bankruptcy Code is used for the sale of a debtor's assets by a trustee and the distribution of money to creditors?

A)Chapter 7
B)Chapter 9
C)Chapter 11
D)Chapter 13
E)Chapter 15

Question 69

Which of the following is called straight bankruptcy?

A)Liquidation
B)Reorganization
C)Reformation
D)Rehabilitation
E)Non-liquidation

Question 70

By filing a(n)________ petition under Chapter 7,creditors can attempt to force into bankruptcy a debtor who is not paying debts as they become due.

A)voluntary
B)involuntary
C)declaratory
D)injunctive
E)interlocutory

Question 71

Which of the following is true regarding the Uniform Commercial Code's definition of default?

A)The Uniform Commercial Code defines default as the failure to make any payment when it is due.
B)The Uniform Commercial Code defines default as the failure to make a payment within 30 days after the payment is due.
C)The Uniform Commercial Code defines default as the failure to make a payment within 60 days after the payment is due.
D)The Uniform Commercial Code defines default as the failure to make a payment within 90 days after the payment is due.
E)The Uniform Commercial Code does not define default.

Question 72

Which of the following is an incorrect statement regarding the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA)of 2005?

A)Under the BAPCPA,an individual may not generally be considered a debtor unless within 180 days prior to filing,the debtor receives credit counseling from a nonprofit budget and credit counseling agency.
B)Under the BAPCPA,if an individual was a debtor in a bankruptcy case that was dismissed within 180 days of the current case,the individual is generally not eligible to be a debtor under Chapters 7,11,or 13.
C)Under the BAPCPA,if a previous bankruptcy was completed rather than dismissed,the individual is generally permitted to file for bankruptcy again.
D)Under the BAPCPA,if a party completes a Chapter 7 bankruptcy,the party is not permitted to seek a Chapter 7 bankruptcy again for eight years.
E)Under the BAPCPA,if a party has at least $10,000 in assets,the party may not file for any type of bankruptcy protection.

Question 73

If a buyer purchases chattel paper or an instrument in the ordinary course of business and he or she is unaware of any security interest in the good,the buyer obtains the good ________.

A)subject to an unperfected security interest
B)subject to a perfected security interest by possession
C)subject to an automatically-perfected security interest
D)subject to an automatically-perfected security interest and a perfected security interest by possession
E)free of any security interest

Question 74

Which of the following is a term used in bankruptcy for debtors who cannot pay their debts in a timely fashion?

A)Statutory debtors
B)Insolvent debtors
C)Financial transients
D)Financially irresponsible parties (FIPs)
E)Financially reprehensible parties (FRPs)

Question 75

________ is a writing that demonstrates a right to payment of money.

A)Chattel paper
B)Transactional paper
C)An allonge
D)An instrument
E)An addendum

Question 76

Which of the following types of bankruptcy occurs when a debtor turns over all assets to a trustee?

A)Liquidation
B)Reorganization
C)Reformation
D)Rehabilitation
E)Non-liquidation

Question 77

The United States Congress made comprehensive changes to bankruptcy law in the ________.

A)Bankruptcy Amendments of 2005
B)Bankruptcy Fraud Protection Act of 2007
C)Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
D)Bankruptcy Fraud and Consumer Shield Act of 2006
E)Insolvency Protection Amendments of 2006

Question 78

Which of the following chapters of the Bankruptcy Code recognizes insolvency proceedings pending in a foreign country and relief for foreign debtors?

A)Chapter 7
B)Chapter 9
C)Chapter 11
D)Chapter 14
E)Chapter 15

Question 79

Which chapter of the Bankruptcy Code is used to reorganize the debtor's financial affairs under the supervision of the bankruptcy court?

A)Chapter 7
B)Chapter 8
C)Chapter 11
D)Chapter 14
E)Chapter 17

Question 80

Which of the following parties cannot be forced into involuntary bankruptcy under Chapter 7?

A)Farmers
B)Ranchers
C)Nonprofit organizations
D)Farmers,ranchers,and nonprofit organizations
E)Farmers and ranchers,but nonprofit organizations can be forced into involuntary bankruptcy