Deck 29: Creditors Rights and Remedies

Question 1

A guaranty contract between the guarantor and the creditor need not be in writing or electronically recorded to be enforceable unless the main purpose exception applies.

Answer 1

False

Question 2

If a homeowner defaults, or fails to make the mortgage payments, the lender has the right to foreclose on the mortgaged property.

Answer 2

True

Question 3

Liens generally take priority over other claims against the same property.

Answer 3

True

Question 4

When a surety or guarantor pays a debt owed to a creditor, he or she acquires any right that the creditor had against the debtor.

Question 5

A surety is entitled to receive from the debtor the actual amount of the debt paid to the creditor on behalf of the suretyship arrangement but not other expenses incurred.

Question 6

Personal property that is most often exempt from satisfaction of judgment debts does not include equipment that the debtor uses in a business or trade.

Question 7

Creditors who have a perfected security interest in a debtor's property normally take priority over mechanic's and artisan's liens.

Question 8

A writ of execution applies to a debtor's nonexempt real or personal property wherever located.

Question 9

The purpose of the homestead exemption is to ensure that the debtor will retain some form of shelter.

Question 10

The lender does not have to strictly comply with the state statute governing foreclosure-substantial compliance is sufficient.

Question 11

With a mechanic's lien, real estate becomes security for a debt.

Question 12

Suretyship and guaranty provide debtors with the right to seek payment from a third party if the debtor, or principal, desires to default on his or her obligations.

Question 13

Recording a mortgage perfects the lender's security interest in the mortgaged property.

Question 14

The homestead exemption interacts with other areas of the law and can sometimes operate to cancel out a portion of a lien on a debtor's real property.

Question 15

Only a few types of property-a debtor's wages or bank account, for example-can be garnished.

Question 16

A surety cannot assert the principal debtor's bankruptcy as a defense to avoid liability on the debtor's obligation.

Question 17

A writ of attachment is a court order that directs a sheriff to seize and sell the debtor's nonexempt property either at the time a lawsuit is filed or immediately afterward.

Question 18

A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor.

Question 19

Bothe federal and state laws expand the amount that can be taken from a debtor's weekly take-home pay through garnishment proceedings.

Question 20

Forbearance is a postponement of part or all of the payments on a loan for a limited time.

Question 21

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

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

Question 22

Fact Pattern 29-2B (Questions B17-B19 apply)
Robin's home is in a state that has a $30,000 homestead exemption. Robin de?faults on a $60,000 debt that she owes to Suburban Mortgage Company. Robin's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 29-2B. Robin will receive

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

Question 23

George borrows funds from Hometown Credit Union (HCU) to buy real property. George signs a written instrument that gives HCU an interest in the property as security for the debt's payment. This is

A) a mortgage.
B) an artisan's lien.
C) a workout agreement.
D) a suretyship arrangement.

Question 24

Stanley's debt to Town Bank is past due. Town Bank obtains a judgment against Stanley to collect the debt, but he refuses to pay. Town Bank asks the court to order Stanley's employer to pay a portion of his paycheck to the bank. This is a request for

A) a mechanic's lien.
B) an order of garnishment.
C) an order that would violate most state laws.
D) a writ of attachment.

Question 25

Lyndon owes $10,000 to Metro Bank. As a prejudgment remedy to collect the debt, Metro could use a writ of

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

Question 26

Pippin signs a lease on behalf of Quixotic Games, Inc., with Riverview Office Suites. As part of the lease, Pippin signs a document titled "GUARANTY." If Quixotic Games stops paying the rent, it is most likely that li?ability or loss for the unpaid amount will rest with

A) no one.
B) Pippin and Quixotic Games.
C) Riverview Office Suites.
D) the other tenants on the same property.

Question 27

Beatrix defaults on a debt to Credit Loan Corporation (CLC). As a creditor, CLC can place liens on all of Beatrix'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 28

Erin and Dooley, a married couple, borrow $120,000 from Capital & Credit Bank to buy a home. When Erin and Dooley divorce, they are unable to make payments on the mortgage. The market value of the home has declined to less than the balance of the loan. Capital & Credit agrees to a sale of the property for this amount. This is

A) a prepayment penalty.
B) forbearance.
C) foreclosure.
D) a short sale.

Question 29

Vito borrows $110,000 from Watershed Bank to buy a home. If he fails to make payments on the mortgage, the bank has the right to repossess and auction off the property securing the loan. This is

A) a short sale.
B) forbearance.
C) foreclosure.
D) the right of redemption.

Question 30

Builders Construction Company performs a contract with Christina to add a sun porch to her house, but she does not pay. In most states, Builders Construction could create a lien and place it on Christina's property by filing

A) a creditor's composition agreement.
B) a writ of attachment.
C) a writ of execution.
D) a written notice of lien.

Question 31

Fact Pattern 29-1B (Questions B4-B5 apply)
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.
Refer to Fact Pattern 29-1B. If Michael imposes a lien on Jill's car, it will end

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

Question 32

A court awards a judgment to Loan Collection Agency, who is the creditor, against Margret, who is the debtor. After the judgment, the creditor requests a court order to seize Margret'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) a violation of most state laws.

Question 33

Portia owes Bon $500 on their roof repair contract, but refuses to pay. To collect, Bon files a me?chanic's lien. Under a mechanic's lien, 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 34

Gena borrows $350,000 from Fish Island Bank to buy a home, which secures the mortgage. In the seventh year of the loan, Gena stops making payments. After the bank repossesses the property but before it is sold, Gena may buy it by paying

A) an amount that equals the potential proceeds from the property's sale. b an amount that exceeds the potential proceeds from the property's sale.
C) the amount of the missed payments, but not more.
D) the full amount of the debt, plus any interest and costs.

Question 35

Fact Pattern 29-2B (Questions B17-B19 apply)
Robin's home is in a state that has a $30,000 homestead exemption. Robin de?faults on a $60,000 debt that she owes to Suburban Mortgage Company. Robin's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 29-2B. Suburban Mortgage may recover

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

Question 36

Ridgeline Bank provides Shirley with a mortgage to buy a home. The rate of interest is fixed for three years and then adjusts annually. This is

A) a fixed-rate mortgage.
B) an adjustable-rate mortgage.
C) a creditor's composition agreement.
D) a guaranty agreement.

Question 37

Fact Pattern 29-1B (Questions B4-B5 apply)
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.
Refer to Fact Pattern 29-1B. Michael refuses to return the car to Jill until she pays for the brake work. This is

A) a garnishment order.
B) a mechanic's lien.
C) an artisan's lien.
D) a violation of most states' laws.

Question 38

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a piano from First Chair, a musical instruments and supplies seller. 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 39

Jordan is a surety for Kelly's loan from Lenders Credit Corporation. When the loan comes due, Kelly tries to pay Lenders Credit, but the creditor rejects the payment. Jordan is

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

Question 40

Fact Pattern 29-2B (Questions B17-B19 apply)
Robin's home is in a state that has a $30,000 homestead exemption. Robin de?faults on a $60,000 debt that she owes to Suburban Mortgage Company. Robin's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 29-2B. If Suburban Mortgage recovers less than it is owed, it can realize the difference from

A) any property that Robin owns.
B) only exempt property that Robin owns.
C) only nonexempt property that Robin owns.
D) property that any other member of Robin's family owns.

Question 41

Rashi is a student at State University. In need of funds to pay for tuition and books, Rashi asks Tiempo Loans, Inc., for a short-term loan. The lender agrees to make a loan if Rashi will have someone who is financially responsible guarantee the loan payments. Umberto, a well-known businessperson and a friend of Rashi's family, calls Tiempo and agrees to pay the loan if Rashi cannot. Because of Umberto's reputation, the loan is made. Rashi is making the payments, but because of illness he is unable to work for one month. He asks Tiempo to extend the loan for three months. The lender agrees, raising the interest rate for the extended period. Umberto is not notified of the extension (and thus does not consent to it). One month later, Rashi drops out of school. All attempts to collect the remainder of the loan from Rashi fail. Can Tiempo assert a claim against Umberto on the debt?

Question 42

The roof in Rosalyn's house springs a leak. She contracts with Shelter Roofing & Restoration Company to repair the roof and fix the dam?age to the house. Rosalyn pays 10 percent of the price in advance. Shelter Roofing does the work, but Rosalyn refuses to pay the rest of the price. What can Shelter Roofing do, and how is it done?