Question 1

Helen's debt to Imprints Printers is past due. Imprints obtains a judgment against Helen,but sherefuses to pay it. Imprints asks the court for an order that directs the sheriff to seize and sell any of Helen's nonexempt real or personal property that is within the court's geographic jurisdiction. This is a request for
A)a writ of execution.
B)a composition agreement.
C)an order that would violate most state laws.
D)an order of garnishment.

Accepted Answer

Imprints is requesting a writ of execution, which is a court order directing the sheriff to enforce a judgment by seizing and selling the debtor's property to satisfy the debt. This is a common legal remedy used to collect unpaid judgments.

Question 2

Lena borrows from Mac and Nicol,using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is
A)Lena.
B)Mac and Nicol,in proportion to Lena's debt to each.
C)Mac only.
D)Nicol only.

Accepted Answer

Nicol has a perfected security interest, which means that they have priority over Mac in the event of a default by Lena. Therefore, Nicol would have the first rights to the collateral. Mac would have the right to any proceeds from the sale of the collateral in proportion to Lena's debt to them, but they would not have the first rights to it. Lena, as the borrower, does not have any rights to the collateral once she defaults on the loans.

Question 3

Hal's Hardware store defaults on a debt to Intrastate Bank,which takes possession of the collateral securing the debt. Intrastate sells the collat-eral. The proceeds from the sale are applied first to
A)the balance of Hal's debt to Intrastate.
B)Hal's debts to other creditors.
C)Intrastate's expenses for the sale.
D)the minimum amount Hal's needs to stay in business.

Accepted Answer

The proceeds from the sale of collateral are first applied to cover the expenses incurred by Intrastate Bank for conducting the sale.

Question 4

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest,this is
A)not sufficient because it is too specific.
B)not sufficient if it matches the description in the financing statement.
C)sufficient if it accurately describes the parties' agreement.
D)not sufficient without an added description of the autos' other identifying characteristics.

Accepted Answer

The description provided is sufficient as long as it accurately identifies the subject property as outlined in the parties' agreement. A detailed description matching the financing statement is not necessary. However, including additional identifying characteristics may provide an extra layer of protection.

Question 5

Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible,he asks the court to order the seizure of Sasha's property. This is a request for
A)a contract of suretyship.
B)an order that would violate most state laws.
C)a writ of attachment.
D)an order of receivership.

Accepted Answer

Tully's request for the seizure of Sasha's property is a request for a writ of attachment, which is a legal order allowing the seizure of property to ensure that a judgment can be collected. Choices A, B, and D are all incorrect as they do not accurately reflect the situation or the request being made by Tully.

Question 6

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine,which Petra still possesses at her repair shop. Petra's lien on the machine will terminate
A)if Petra continues to maintain possession.
B)if Petra does not file a written notice of lien within thirty days.
C)if Petra voluntarily surrenders possession.
D)within thirty days.

Accepted Answer

Petra's lien on the machine will terminate if she voluntarily surrenders possession. This means that Petra will no longer have a legal claim to the machine if she gives it back to Oscar. If Petra continues to maintain possession, her lien will remain in effect until she is paid the $500 owed to her. Filing a written notice of lien within thirty days may be necessary to protect Petra's rights in some situations, but it is not directly relevant to the question of when her lien will terminate. The statement "within thirty days" is too vague to be considered a valid answer, as it does not specify what will happen after that time period expires.

Question 7

Jessie's debt to Kayla is past due. Kayla brings a legal action against Jessie to collect the debt. Kayla asks the court to order Liberty Bank,in which Jessie has an account,to pay a portion of the funds to Kayla. This is a request for
A)a writ of execution.
B)an order of garnishment.
C)an order that would violate most state laws.
D)a composition agreement.

Accepted Answer

Kayla is requesting an order of garnishment, which allows her to collect a portion of Jessie's funds held by Liberty Bank. This is a legal option for a creditor to collect a debt from a debtor, but it must follow certain procedures and limits set by state laws. A writ of execution is a court order for the seizure and sale of a debtor's property to satisfy a debt, but this is not mentioned in the situation. A composition agreement is a settlement offer made by a debtor to their creditors, which is also not mentioned in the situation.

Question 8

Quotient Financial Corporation is a secured party with a security inter-est in property owned by Retail Sales Company. Perfection of this secu-rity in-ter-est may not protect Quotient Financial against the claim of
A)a bank.
B)a buyer in the ordinary course of business.
C)a subsequent lien creditor.
D)a trustee in bankruptcy.

Accepted Answer

A buyer in the ordinary course of business generally takes goods free of a security interest created by the seller, even if the security interest is perfected.

Question 9

Frances borrows $1,000 from Garden State Bank,using her recreational vehicle (RV)motor home,which she purchased at Hugo's RV Sales & Service,as collateral. To perfect its security in-terest,the bank must file its financing statement with
A)the secretary of state.
B)the county clerk.
C)the city treasurer.
D)Hugo's RV Sales & Service.

Accepted Answer

To perfect a security interest in a vehicle, the financing statement is typically filed with the secretary of state.

Question 10

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)aviolation of most states' laws.

Accepted Answer

The answer of Loni delivers her Mazda to be repaired...

Question 11

Kayla's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money,Kayla'sbuyssixMiatas. The Miatas are
A)beyond the extent of Lenders's interest.
B)after-acquired property.
C)a future advance.
D)proceeds.

Accepted Answer

The Miatas that Kayla's Auto Sales purchased are considered after-acquired property, meaning they were acquired after the security agreement was established. As such, they are subject to the security agreement and Lenders Finance Corporation's interest.

Question 12

Frank performs a contract with Gene to add a garage to Gene's property,but Gene does not pay. Frank can file a lien on Gene's property if,from the last date labor or materials were provided,he acts
A)immediately.
B)within 60 to 120 days.
C)within two years.
D)within a reasonable time.

Accepted Answer

In most states, including Florida where the legal concept of lien was first introduced in the United States, a contractor or supplier must file a lien within 60 days of the last date they provided labor or materials. However, some states may allow up to 120 days to file a lien. Therefore, the best choice is option B.

Question 13

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corpora-tion. Between these interests,the first to be filed or perfected has priority over other filed or perfected security interests in
A)most circumstances.
B)no circumstances.
C)states that have not adopted Article 9 of the UCC.

Accepted Answer

According to the first to file or perfect rule under Article 9 of the UCC, the secured party who files or perfects their interest first has priority over other parties with filed or perfected security interests. Therefore, in most circumstances, the first to be filed or perfected has priority over other filed or perfected security interests.

Question 14

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by
A)attaching a bright label to John's property.
B)calculating the precise amount of John's debt.
C)correcting grammatical errors in the parties' written agreement.
D)filing a financing statement with the appropriate authority.

Accepted Answer

The best way for Kirsten to perfect her interest in John's personal property and ensure that it is used to pay off his debt is by filing a financing statement with the appropriate authority. This creates a public record of the debt and the security interest Kirsten has in John's property. Attaching a label to John's property or correcting grammatical errors in the agreement will not provide legal protection for Kirsten's interest. Calculating the amount of the debt is important, but it does not perfect Kirsten's interest in the property.

Question 15

Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is
A)a first-in-time rule.
B)a floating lien.
C)a funds guaranty.
D)in violation of secured transactions law.

Accepted Answer

A security agreement that covers proceeds from the sale of after-acquired property creates a floating lien. This allows the lender to have a security interest in future property (after-acquired property) that is not yet in the possession of the debtor at the time the security agreement is formed. This is a common practice in secured transactions law.

Question 16

Gina borrows from Hilltop Bank the funds to buy a car. The car secures the debt. Gina defaults on the loan. Hilltop takes possession of the car,planning to sell it to recover some of the unpaid debt. Before Hilltop sells the car or enters into a contract for its sale,Gina can pay the bank what she owes and take back the car. This is
A)a deficiency judgment.
B)a floating lien.
C)the right of redemption.
D)the right of retention.

Accepted Answer

The right of redemption is the legal right of a borrower to regain ownership of an asset, such as a car or house, after defaulting on a loan and before the asset is sold by the lender to recover the debt. In this scenario, Gina has the right to pay off the loan and take back possession of the car before Hilltop sells it. Choice A, deficiency judgment, refers to the difference between the amount owed on a loan and the amount recovered through the sale of the collateral. Choice B, floating lien, is a security interest in an asset, such as a car or boat, that may not have a fixed location or may move from one location to another. Choice D, right of retention, refers to the right of a service provider to retain possession of a customer's property until payment is made for services rendered.

Question 17

Debit & Credit Financing,Inc.,and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation. Priority between these security interests is generally determined by
A)the amount of the claim.
B)the custom in the trade.
C)the time of perfection or attachment.
D)the "float" of the liens.

Accepted Answer

Priority between security interests is determined by the time of perfection or attachment. This means that the earlier secured party who perfected their security interest or attached first has priority over later secured parties.

Question 18

Capital Projects,Inc.,files a financing statement to provide no-tice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of
A)five days.
B)five months.
C)five weeks.
D)five years.

Accepted Answer

The Uniform Commercial Code (UCC) establishes that the initial effective term of a financing statement is five years, as stated in UCC Section 9-515(a). Therefore, choice D is the correct option.

Question 19

Brass & Woodwind Instruments,Inc.,allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include
A)a description of the collateral.
B)a statement of the reason for allowing Clifton to take the goods.
C)Brass & Woodwind's name.
D)Clifton's name.

Accepted Answer

The financing statement does not need to include a statement of the reason for allowing Clifton to take the goods. The other options are required to be included in a legally sufficient financing statement.

Question 20

Custom Cabinets & Carpentry Company has a claim against Duane's property to satisfy a debt that takes priority over other claims against the same property. This is
A)a lien.
B)a violation of most state laws.
C)a composition agreement.
D)a contract of suretyship.

Accepted Answer

This scenario describes a lien, which is a legal claim against a property to secure payment of a debt. Liens can take priority over other claims against the same property and can be enforced through foreclosure if the debt is not satisfied.

Quiz 25: Security Interests and Creditors Rights

Lena borrows from Mac and Nicol,using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is

Hal's Hardware store defaults on a debt to Intrastate Bank,which takes possession of the collateral securing the debt. Intrastate sells the collat-eral. The proceeds from the sale are applied first to

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest,this is

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

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine,which Petra still possesses at her repair shop. Petra's lien on the machine will terminate

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

Quotient Financial Corporation is a secured party with a security inter-est in property owned by Retail Sales Company. Perfection of this secu-rity in-ter-est may not protect Quotient Financial against the claim of

Frances borrows $1,000 from Garden State Bank,using her recreational vehicle (RV) motor home,which she purchased at Hugo's RV Sales & Service,as collateral. To perfect its security in-terest,the bank must file its financing statement with

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

Kayla's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money,Kayla'sbuyssixMiatas. The Miatas are

Frank performs a contract with Gene to add a garage to Gene's property,but Gene does not pay. Frank can file a lien on Gene's property if,from the last date labor or materials were provided,he acts

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corpora-tion. Between these interests,the first to be filed or perfected has priority over other filed or perfected security interests in

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by

Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is

Debit & Credit Financing,Inc.,and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation. Priority between these security interests is generally determined by

Capital Projects,Inc.,files a financing statement to provide no-tice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of

Brass & Woodwind Instruments,Inc.,allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include

Custom Cabinets & Carpentry Company has a claim against Duane's property to satisfy a debt that takes priority over other claims against the same property. This is