Question 1

Perfection can occur merely by possession of the collateral by the creditor.

Accepted Answer

If a debtor defaults on a loan, the creditor can take possession of the collateral to satisfy the debt without going through a legal process. This is known as a "secured loan" and the creditor's right to the collateral is perfected by possession alone.

Question 2

The property that is subject to the security interest is called collateral.

Accepted Answer

This is correct as collateral is the specific property or asset that is pledged as security for a loan or other obligation.

Question 3

When a security interest in property is inferior to other interests and claims to the property,it is said to be perfected.

Accepted Answer

When a security interest in property is inferior to other interests and claims to the property, it is said to be unperfected. A perfected security interest has priority over unperfected security interests and other claims to the property.

Question 4

A security agreement need not describe the collateral involved.

Accepted Answer

A security agreement must describe the collateral involved to properly identify and establish the security interest in the collateral.

Question 5

Consumer goods are classified into different categories based on the debtor's intended use,not the physical characteristics of the goods.

Accepted Answer

Consumer goods are classified based on the intended use, such as food, clothing, electronics, and household goods. Physical characteristics may be a factor in the classification, but the primary consideration is the intended use by the debtor.

Question 6

Grund,a night club performer,financed the purchase of a drum set to be used in his night club act.The collateral is classified as a consumer good.

Accepted Answer

The answer of Grund,a night club performer,financed the purchase of...

Question 7

An after-acquired property clause in a consumer security agreement can cover only goods acquired by the debtor within thirty (30)days after the creditor gave value to the debtor.

Accepted Answer

An after-acquired property clause in a consumer security agreement can cover goods acquired by the debtor at any time after the agreement is signed, not just within thirty days after the creditor gave value to the debtor. Therefore, statement A is false.

Question 8

A security interest is a property right that enables the creditor to take possession of the property if the debtor does not pay the amount owed.

Accepted Answer

A security interest grants the creditor the right to take possession of the property in the event of default by the debtor. This right is typically granted in exchange for a loan or other form of credit.

Question 9

Collateral may change its form and character during the course of a security agreement.

Accepted Answer

Collateral can change its form and character during the course of a security agreement, which means it can be sold, exchanged, or transformed into a different asset. This is usually allowed as long as the value of the collateral remains sufficient to cover the debt in case of default.

Question 10

Consumer goods are not subject to perfection of a security interest.

Accepted Answer

Consumer goods (goods used or bought for use primarily for personal, family, or household purposes) are subject to perfection of a security interest under certain circumstances, such as when the debtor grants the creditor a security interest in the goods and the creditor takes possession of the goods or files a UCC-1 financing statement.

Question 11

Claim in a changing or shifting stock of the buyer's goods is known as a floating lien.

Accepted Answer

A floating lien is a type of security interest that covers a changing or shifting stock of the buyer's goods. This means that as new inventory is added, the lien will attach to the new goods as well.

Question 12

A security agreement must be backed by a written record even if the creditor has possession of the collateral.

Accepted Answer

A security agreement does not need to be backed by a written record if the creditor has possession of the collateral, as possession itself can serve as evidence of the security interest.

Question 13

Attachment provides creditors with rights.

Accepted Answer

When a creditor has a security interest in a debtor's property, it gives them the right to take possession of the property if the debtor defaults on their obligation. This is known as attachment and provides creditors with certain legal rights to recover their debt.

Question 14

Creditors cannot legally request collateral on a previously unsecured loan.

Accepted Answer

Creditors can legally request collateral on a previously unsecured loan under certain circumstances, such as when the borrower defaults on the loan.

Question 15

A debtor must have rights in the collateral for a security interest to attach.

Accepted Answer

A security interest is a legal claim to collateral that is used to secure a debt. In order for a security interest to be valid, the debtor must have rights in the collateral. If the debtor does not have rights in the collateral, then the security interest will not attach and the creditor will not have a legal claim to that collateral.

Question 16

For a security interest to attach,the creditor must file a financing statement.

Accepted Answer

Filing a financing statement is not always necessary for a security interest to attach. Other factors, such as possession of the collateral or a written agreement, can also establish a valid security interest. However, filing a financing statement is a common and important way for creditors to perfect their security interests and prioritize their claims against other creditors.

Question 17

A security interest gives a creditor the same protection than is afforded by a right to sue on the debt.

Accepted Answer

The answer of A security interest gives a creditor the...

Question 18

A security interest needs to be perfected,whether or not there are competing claims for the collateral.

Accepted Answer

The answer of A security interest needs to be perfected,whether...

Question 19

When a consumer gives a creditor a security interest in forthcoming health insurance proceeds,the creditor must file a statement with the insurance company in order to have a perfected security interest.

Accepted Answer

Perfection of a security interest in insurance proceeds typically involves filing a financing statement under Article 9 of the Uniform Commercial Code (UCC) rather than filing a statement with the insurance company. The process of perfection generally does not require direct notification to the insurance company by the creditor.

Question 20

In a security agreement,the creditor and the debtor agree that the creditor has a security interest.

Accepted Answer

In a security agreement, the creditor and the debtor agree that the creditor has a security interest in the debtor's property or assets to secure the repayment of a debt or other obligation.

Quiz 34: Secured Transactions in Personal Property