Question 1

A bank taking possession of collateral does not have to file a financing statement in order to perfect its interest.

Accepted Answer

When a bank takes possession of collateral, it is considered a secured transaction and under Article 9 of the Uniform Commercial Code (UCC), possession is a method to perfect a security interest without the need for filing a financing statement.

Question 2

Value is consideration,according to the UCC.

Accepted Answer

According to the UCC (Uniform Commercial Code), value is defined as consideration, which can either be a benefit received by the party giving consideration or a detriment suffered by the party receiving consideration.

Question 3

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,under the UCC.

Accepted Answer

According to the UCC, a buyer in the ordinary course of business takes goods free of any security interest created by the seller of the goods unless the security interest is perfected. This rule is designed to protect innocent buyers who purchase goods without knowledge of any security interest that may exist. However, if the security interest is perfected, the buyer takes the goods subject to the security interest, and the creditor has the right to repossess the goods if the buyer defaults on the debt.

Question 4

A person or party that has an obligation to the secured party is a ________.

Accepted Answer

A)A debtor is the person or party that has an obligation to the secured party.
B)A debtor is the person or party that has an obligation to the secured party.
C)A debtor is the person or party that has an obligation to the secured party.
D)A debtor is the person or party that has an obligation to the secured party.
E)A debtor is the person or party that has an obligation to the secured party.

Question 5

The UCC defines default as when a debtor fails to make payments on a loan.

Accepted Answer

The UCC (Uniform Commercial Code) does not specifically define default merely as failing to make payments on a loan; default can occur under various circumstances as outlined in the agreement between the debtor and creditor, including but not limited to failure to make payments.

Question 6

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

Accepted Answer

This statement is true. Collateral is the property or assets that are offered as security to the lender in exchange for a loan. If the borrower fails to repay the loan, the lender can take possession of the collateral as a way to recover their losses.

Question 7

Which of these UCC articles governs secured transactions in personal property?

Accepted Answer

A)Article 9 of the Uniform Commercial Code UCC)governs secured transactions
in personal property as opposed to real property).
B)Article 9 of the Uniform Commercial Code UCC)governs secured transactions in personal property as opposed to real property).
C)Article 9 of the Uniform Commercial Code UCC)governs secured transactions in personal property as opposed to real property).
D)Article 9 of the Uniform Commercial Code UCC)governs secured transactions in personal property as opposed to real property).
E)Article 9 of the Uniform Commercial Code UCC)governs secured transactions in personal property as opposed to real property).

Question 8

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

Accepted Answer

A)A secured transaction is a transaction in which the payment of a debt is
guaranteed by personal property owned by the debtor.
B)A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.
C)A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.
D)A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.
E)A secured transaction is a transaction in which the payment of a debt is guaranteed by personal property owned by the debtor.

Question 9

An interest in personal property or fixtures that secures payment or performance of an obligation is ________.

Accepted Answer

A)A secured interest is an interest in personal property or fixtures which secures
payment or performance of an obligation.
B)A secured interest is an interest in personal property or fixtures which secures payment or performance of an obligation.
C)A secured interest is an interest in personal property or fixtures which secures payment or performance of an obligation.
D)A secured interest is an interest in personal property or fixtures which secures payment or performance of an obligation.
E)A secured interest is an interest in personal property or fixtures which secures payment or performance of an obligation.

Question 10

The person who fails to make payments is said to have defaulted on a loan.

Accepted Answer

Defaulting on a loan means failing to make payments on time or as agreed in the loan agreement.

Question 11

The party that perfects its interest in collateral has first claim,when two parties have an interest in the same collateral.

Accepted Answer

This is known as the "first to file" rule, meaning that the party who files or perfects their interest in the collateral first has priority over later claimants.

Question 12

Perfection of a security interest in a motor vehicle generally occurs when the secured party files the interest with the state's Department of Motor Vehicles.

Accepted Answer

The answer of Perfection of a security interest in a...

Question 13

The creditor must perfect a security interest in the collateral of the debtor in order to become a secured party.

Accepted Answer

The answer of The creditor must perfect a security interest...

Question 14

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

Accepted Answer

A security interest can attach to collateral that the debtor does not yet possess, such as goods that are still in transit or have not yet been manufactured.

Question 15

When perfection by possession occurs,the parties must have a written security agreement.

Accepted Answer

Perfection by possession occurs when the secured party takes possession of the collateral. A written security agreement is not required for this type of perfection.

Question 16

Generally,unsecured parties have priority over secured creditors.

Accepted Answer

Secured creditors generally have priority over unsecured parties. This means that if a borrower defaults on their loan and the lender has a security interest in the borrower's property, the secured creditor has a right to take possession of the property and sell it to recover the outstanding debt before unsecured creditors can make claims to the borrower's assets.

Question 17

The buyer can obtain the good involved free of any security interest,if a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest.

Accepted Answer

According to the Uniform Commercial Code (UCC), a buyer who purchases chattel paper in the ordinary course of business and without notice of any prior security interest can obtain the good involved free of any security interest.

Question 18

A description of the collateral does not need to be included in a security agreement.

Accepted Answer

A security agreement must include a description of the collateral that is being used as security for the loan or debt. This is important information for both the lender and borrower to ensure that there is no confusion about which assets are being used as collateral.

Question 19

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

Accepted Answer

A)A secured party is the person or party that holds the interest in the secured
property.
B)A secured party is the person or party that holds the interest in the secured property.
C)A secured party is the person or party that holds the interest in the secured property.
D)A secured party is the person or party that holds the interest in the secured property.
E)A secured party is the person or party that holds the interest in the secured property.

Question 20

When a debtor uses collateral to secure a loan from a bank,a purchase-money security interest is created.

Accepted Answer

A purchase-money security interest (PMSI) specifically refers to an interest that secures repayment of money used by the debtor to purchase the collateral. It is not created by simply using collateral to secure a loan unless the loan proceeds are used to acquire that collateral.

Quiz 30: Secured Transactions