Deck 28: Creditors Rights and Remedies

Question 1

To use attachment as a remedy, a creditor must have possession (be "attached" to) of a debtor's property.

Answer 1

True

Question 2

A court may not order an employer, as a result of a garnishment pro?ceed?ing, to turn over a debtor-employee's property to pay a debt.

Answer 2

False

Question 3

A contractor who makes improvements to real property, but who is not paid for the work, may place a mechanic's lien on the property.

Answer 3

True

Question 4

All of a debtor's pay can be gar?nished.

Question 5

To foreclose on real property securing a mortgage, the mortgagee must ask a court for a deficiency judgment.

Question 6

A mortgagee can obtain a deficiency judgment against a defaulting debtor only in a state in which there is no equity of redemption.

Question 7

A writ of execution is a court order to seize a debtor's property after the entry of a final judgment in a creditor's lawsuit against the debtor.

Question 8

A creditor's composition agreement are enforceable.

Question 9

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

Question 10

Almost all types of property can be garnished.

Question 11

A creditor with an artisan's lien on property can sell the property to sat?isfy the debt.

Question 12

An attachment is a court-ordered seizure and taking into custody of prop?erty prior to the securing of a judgment for a past-due debt.

Question 13

A default occurs if a debtor fails to pay a creditor as promised.

Question 14

If a debtor will not pay a judgment, a creditor can only resort to "self-help" to collect.

Question 15

If the proceeds of a foreclosure sale cover the costs and the mortgage debt, any surplus is a windfall to the creditor.

Question 16

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

Question 17

A creditor with a mechanic's lien on property can sell the property to sat?isfy the debt.

Question 18

A mortgagee has the right to seek a judicial sale of prop?erty on a mortgagor's default.

Question 19

An employer can dismiss an employee due to garnishment for one debt.

Question 20

State law governs mechanic's liens.

Question 21

Before the guarantor of a debt can be required to answer for the debt of a debtor, the debtor must have defaulted on the underlying obligation.

Question 22

A guarantor is secondarily liable on an obliga?tion.

Question 23

A guaranty contract must be in writing to be enforceable.

Question 24

Federal law disallows the use of state homestead exemptions.

Question 25

A guarantor is released from his or her obligation if a debtor cannot pay it.

Question 26

Subrogation refers to the priority of more than one creditor to satisfaction of judgment debts from a debtor's property.

Question 27

A writ of attachment is a court order to seize a debtor's property before the entry of a final judgment in a creditor's lawsuit against the debtor.

Question 28

If the debtor offers to pay the debt owed to a creditor but the creditor re?fuses the tender, the surety remains obligated on the debt.

Question 29

If a surety pays the debt owed to a creditor, then the surety acquires any rights that the creditor had against the debtor.

Question 30

A surety is primarily liable on an obliga?tion.

Question 31

A debtor's car may be exempt from satisfaction of a judgment debt.

Question 32

A surety can use any defenses available to a debtor to avoid liability on the obligation to the creditor.

Question 33

A creditor's extension of time to a debtor for making payment, without the consent of the surety, will not discharge the surety.

Question 34

A surety is released from his or her obligation if the debtor pays it.

Question 35

A debtor's car may be exempt from satisfaction of a judgment debt.

Question 36

A release by the creditor of the principal debtor, without the consent of the surety, will, without more, release the surety.

Question 37

A contract of suretyship must be in writing to be enforceable.

Question 38

A surety is released from his or her obligation if a debtor cannot pay a debt.

Question 39

Clothing is not included in state exemption statutes.

Question 40

A homestead exemption allows a debtor to pay a fixed debt for an amount less than was actually owed.

Question 41

Frank's farm is to be sold at a foreclosure sale. For Frank to keep the farm by paying the full amount of the debt, plus any interest and costs that have accrued, is

A) the equity of redemption.
B) the exercise of exemption.
C) the right of contribution.
D) the right of subrogation.

Question 42

Flip's debt to George is past due. George brings a legal action against Flip to collect the debt. George asks the court to order Home Bank, in which Flip has an account, to pay a portion of the funds to George. This is a request for

A) an exemption from most states' limits on creditors' actions.
B) an order of garnishment.
C) an order that would violate most state laws.
D) a right of subrogation.

Question 43

Khali's debt to Lew is past due. Lew obtains a judgment against Khali to collect the debt, but Khali refuses to pay. Lew asks the court to order Khali's employer to pay a portion of Khali's paycheck to Lew. This is a request for

A) an exemption from most federal limits on creditors' actions.
B) an order of garnishment.
C) an order that would violate most state laws.
D) a right of contribution.

Question 44

First State Bank holds a mortgage on Gigi's property. Gigi defaults on the debt. The bank forecloses. If the proceeds of the foreclosure sale are insuf?ficient to pay the costs of the sale and the debt, the bank can

A) obtain a deficiency judgment against Gigi.
B) prorate the costs to its other debtors.
C) reclaim the property as a voidable transfer.
D) use the equity of redemption to redeem the property.

Question 45

Loni delivers her Mazda to be repaired at Nile's Body Shop. Loni agrees to pay cash. Nile performs, but Loni does not pay. Nile tells Loni that he will keep the car until she pays. This is

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

Question 46

Ian's mortgage debt to Jeff is past due. Jeff brings a legal action against Ian to collect the debt. Jeff asks the court to order the sale of the mortgaged property and the payment of a portion of the proceeds to Jeff. This is a request for

A) a deficiency judgment.
B) a foreclosure.
C) a right of reimbursement.
D) redemption.

Question 47

Dolf borrows money from Elin. Dolf defaults. To use attachment as a remedy, Elin must first

A) file a suit against Dolf.
B) lose a suit against Dolf.
C) succeed in a suit against Dolf.
D) take possession of Dolf's property.

Question 48

Bob owes $5,000 to Consumer Lender Corporation (CLC). As a prejudg?ment remedy to collect the debt, CLC could use

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

Question 49

Opie's debt to Pyle is past due. Pyle obtains a judgment against Opie to collect the debt, but Opie refuses to pay. Pyle asks the court to order the seizure and sale of Opie's property. This is a request for

A) a guaranty (or suretyship) contract.
B) an order that would violate most states' laws.
C) a writ of attachment.
D) a writ of execution.

Question 50

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets, which Ewing still possesses. Ewing's lien on the sets will terminate

A) if Ewing continues to maintain possession.
B) if Ewing does not file a written notice of lien within thirty days.
C) if Ewing surrenders possession.
D) within thirty days.

Question 51

Pruit performs a contract with Quint to reshingle the roof on Quint's house, but Quint does not pay. Pruit notifies Quint that Pruit will foreclose on the house and sell it to satisfy the debt. This is

A) a judicial lien.
B) a mechanic's lien.
C) an artisan's lien.
D) a violation of most state laws.

Question 52

Liu and Midge-Nero's creditors-contract with Nero for the discharge of Nero's liquidated debts on payment of a lesser sum. This is

A) a composition agreement.
B) a subrogation.
C) a suretyship agreement.
D) in violation of most states' laws.

Question 53

Fact Pattern 28-1B
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan applica?tion, making himself personally liable for payment whether or not Beta defaults, Cliff will be

A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question 54

Larry borrows money from Joan. To use a writ of execu?tion as a remedy, Joan must first

A) be unable to collect the amount of a judgment against Larry.
B) be unable to redeem Larry's exempt property before a sale will occur.
C) notify Larry in writing (in a "writ") of her intent.
D) obtain and maintain possession of Larry's property.

Question 55

Ezra's mortgage debt to Foxy is past due. Foxy brings a legal action against Ezra to collect the debt. Foxy asks the court to order the sale of the mortgaged property and the payment of a portion of the proceeds to Foxy. Before the sale, Ezra seeks to keep the property by paying the full amount of the debt. This is

A) a deficiency judgment.
B) a right of redemption.
C) a right of subrogation.
D) not possible.

Question 56

Donald's debt to Everett is past due. Everett brings a legal action against Donald to collect the debt. To ensure that a judgment in Everett's favor will be collectible, Everett asks the court to order the seizure of Donald's property. This is a request for

A) a guaranty (or suretyship) contract.
B) an order that would violate most state laws.
C) a writ of attachment.
D) a writ of execution.

Question 57

Fact Pattern 28-1B
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
Refer to Fact Pattern 28-1B. Generally, for a contract between First National and Cliff with respect to liability for Beta's loan to be enforceable, it must be in writing if Cliff is

A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question 58

Jen has a claim against Kevin's property that must be satisfied before the property is available to satisfy the claims of other creditors. This is

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

Question 59

Mike owes $12,000 to Nora, $6,000 to Owen, and $6,000 to Pat. The three creditors enter into an agreement with Mike to discharge the debts on payment of a sum of $12,000 to them, to be divided proportionately. This is

A) a composition agreement.
B) a guaranty agreement.
C) a judicial lien.
D) a suretyship agreement.

Question 60

Suha performs a contract with Tyler to add a second story addition to Tyler's house, but Tyler does not pay. In most states, Suha can create a lien and place it on Tyler's property by filing

A) an order of garnishment.
B) a writ of attachment.
C) a writ of execution.
D) a written notice of lien.

Question 61

Fact Pattern 28-3B
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 28-3B. Nina may recover

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

Question 62

Ross and Sally agree to guarantee Tim's debt. Ross's maximum liabil?ity is $30,000, and Sally's is $20,000. Tim owes $20,000 and is in default. Ross pays the creditor the entire amount. In the ab?sence of an agree?ment to the contrary, Ross can recover from Sally

A) $8,000.
B) $10,000.
C) $20,000.
D) nothing.

Question 63

Dora, Ed, and Fran are co-sureties of Glen's debt to Hi-Credit Company. Dora pays Glen's entire debt. Dora's right to seek proportionate pay?ments from Ed and Fran is the right of

A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

Question 64

Jay is a surety for Karen's loan from Little Bank. Jay's right to be repaid by Karen after having paid her debt is the right of

A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

Question 65

Rhonda's debt to Skyler is past due. Skyler brings a legal action against A to collect the debt. To ensure that a judgment in Skyler's favor will be collectible, Skyler asks the court to order the seizure of Rhonda's property. Exempt from such an order in most states would be

A) all of Rhonda's real property.
B) as much of Rhonda's real property as Rhonda opts to exempt.
C) none of Rhonda's real property.
D) Rhonda's family home in its entirety or up to a specified amount.

Question 66

Fact Pattern 28-1A
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-1A. If Edie is a guarantor, then the guaranty is re?quired to be in writing because of

A) the debtor's right of redemption.
B) the co-signer's right of contribution.
C) the creditor's transfer of possession.
D) the Statute of Frauds.

Question 67

Refer to Fact Pattern 28-3B. 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 68

Fact Pattern 28-2B
Rico signs a lease on behalf of Start-Up, Inc., with Town Properties Corporation. As part of the lease, Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 28-2B. If Start-Up stops paying the rent, it is most likely that li?ability or loss for the unpaid amount will rest with

A) no one.
B) Rico and Start-Up.
C) Start-Up only.
D) Town Properties only.

Question 69

Brick's debt to Conry is past due. Conry brings a legal action against Brick to collect the debt. To ensure that a judgment in Conry's favor will be collectible, Conry asks the court to order the seizure of Brick's property. Exempt from such an order in most states is

A) all of Brick's personal property.
B) as much of Brick's personal property as Brick opts to exempt.
C) equipment that Brick uses in a business up to a specified amount.
D) none of Brick's personal property.

Question 70

Fact Pattern 28-1A
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-1A. If Edie signs the application but fails to con?di?tion her signature on Finest's agreement to pursue its legal remedies against Dina before looking to her, then Edie is

A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question 71

Refer to Fact Pattern 28-2B. The reason for the result in the previous question is that

A) Rico signed a "GUARANTY."
B) Rico signed the lease "on Start-Up's behalf."
C) Town Properties probably forced Rico to sign the "GUARANTY."
D) Town Properties still owns the property and is free to re-lease it.

Question 72

Fact Pattern 28-1B
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan applica?tion, making himself personally liable for payment only if Beta de?faults, Cliff will be

A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question 73

Fact Pattern 28-3B
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 28-3B. Mary will receive

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

Question 74

Fact Pattern 28-1A
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-1A. If Edie signs the application only after lan?guage is included that requires Finest to exhaust its legal remedies against Dina before looking to her, then Edie is

A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question 75

Rita is a surety for Sue's loan from Total Finance Company. Rita's right to "step into the shoes" of Total Finance, after paying Sue's debt, and ex?er?cise any of the Total Finance's rights against Sue is the right of

A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

Question 76

Bret defaults on a loan owed to City Bank. As a creditor, City Bank may attempt to place liens on all of Bret's property except

A) motor vehicles that Bret uses to commute to work.
B) personal property that consists of stock in various corporations.
C) property that Bret elects to exempt.
D) real property on which Bret plans to open a retail store.

Question 77

Bill and Cody agree to guarantee Dave's debt. Bill's maximum liabil?ity is $60,000, and Cody's is $40,000. Dave owes $40,000 and is in default. Bill pays the creditor the entire amount. In the ab?sence of an agree?ment to the contrary, Bill can recover from Cody

A) $0.
B) $16,000.
C) $20,000.
D) $40,000.

Question 78

Fact Pattern 28-1A
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-1A. 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 79

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 80

Kwik Delivery Company buys a truck from Lucky Vehicles, Inc., under a guaranty signed by Mina, Kwik's president, who writes "President" after her signature. When Kwik does not pay for the truck, Lucky sues Mina, who claims that she did not intend to be bound by the guaranty. The court would most likely rule in favor of

A) Lucky, because Mina's guaranty is unambiguous.
B) Lucky, because Mina works for Kwik.
C) Mina, because she did not intend to be bound by the guaranty.
D) Mina, because she signed only as a corporate officer.