Question 1

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

Accepted Answer

Mina's signature on the guaranty is unambiguous, as she explicitly identified herself as the president of Kwik. Therefore, the court is likely to rule in favor of Lucky, as Mina's intent is irrelevant when the guaranty is clear and unambiguous.

Question 2

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

Accepted Answer

In most states, equipment that Brick uses in a business up to a specified amount is exempt from an order of seizure. This means that Conry cannot seize Brick's business equipment up to a certain value in order to collect the debt.

Question 3

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 insufficient to pay the costs of the sale and the debt,the bank can

Accepted Answer

If the proceeds of the foreclosure sale are insufficient to pay the debt and costs, the bank can obtain a deficiency judgment against Gigi for the remaining balance. This means Gigi is still responsible for paying the amount owed even after the property is sold at foreclosure.

Question 4

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

Accepted Answer

This is a composition agreement, where the three creditors agree to discharge the debts in exchange for a lump sum payment that is divided proportionately among them. It is different from a guaranty agreement, which involves a third party agreeing to pay the debt if the debtor defaults, and from a judicial lien, which is a legal claim placed on a debtor's property to secure a debt. It is also different from a suretyship agreement, where a person guarantees the debt of another person.

Question 5

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 payments from Ed and Fran is the right of

Accepted Answer

Dora's right to seek proportionate payments from Ed and Fran is called contribution. This is a right that arises among co-sureties when one of them pays more than their proportionate share of a debt. The co-surety who paid more has the right to seek reimbursement from the other co-sureties for their proportionate share of the debt.

Question 6

Mabel files a petition in bankruptcy.The initial proceeding on this petition will be in

Accepted Answer

Bankruptcy cases are filed in federal bankruptcy courts, which are specialized courts under the jurisdiction of the federal district courts. Therefore, the initial proceeding on Mabel's bankruptcy petition will be in a federal bankruptcy court.

Question 7

Ollie files a petition in bankruptcy.At the moment of filing

Accepted Answer

When a petitioner files for bankruptcy, an automatic stay goes into effect, which means creditors are prohibited from taking action to collect debts. This gives the petitioner some breathing room and time to work out a repayment plan or liquidation of assets with the assistance of the bankruptcy court. Ollie's debts are not discharged at the moment of filing, and his property is not distributed to his creditors. Ollie's petition may be dismissed if it is incomplete or deemed fraudulent after investigation.

Question 8

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

Accepted Answer

A writ of execution is a legal remedy used to enforce a judgment. Therefore, it can only be used if there is already a judgment in place that Larry owes Joan money. Option A correctly identifies that Joan must be unable to collect the amount of the judgment against Larry before using a writ of execution as a remedy.

Question 9

Kofi files a petition for bankruptcy.Kofi must include with the petition

Accepted Answer

Along with the petition for bankruptcy, Kofi must include a list of creditors and the amount of the debt owed to each, a list of property, and a statement of financial affairs. This information is necessary to determine the type of bankruptcy, the extent of the debt, and the assets available for repayment.

Question 10

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

Accepted Answer

Lew is requesting an order of garnishment, which allows for a portion of Khali's paycheck to be deducted and paid directly to Lew towards the debt. This is a common method for collecting unpaid debts after obtaining a judgment against the debtor.

Question 11

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

Accepted Answer

Ewing's lien on the sets will terminate if he surrenders possession. This means that as soon as Delia requests the sets back and Ewing returns them, his lien on them will no longer be valid.

Question 12

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

Accepted Answer

The equity of redemption refers to the right of a debtor to reclaim ownership of their property by paying the full outstanding amount of the debt, along with any interest and costs that have accrued. This right exists in most foreclosure sales and allows the debtor to avoid losing their property altogether. Therefore, option A) is the correct answer.

Question 13

Lulu joins with other creditors to force Mikhail,a debtor,into bankruptcy.One of the goals of bankruptcy law with respect to creditors is to

Accepted Answer

The goal of bankruptcy law with respect to creditors is to provide equitable treatment in the competition for debtor assets, which means that all creditors should have an equal opportunity to receive a share of the debtor's assets. This ensures fairness and prevents certain creditors from receiving preferential treatment over others. The other options are not true because bankruptcy law does not exist to encourage lending to insolvent debtors nor does it exist solely to protect creditor assets from diminution in value. Also, not all debtor property is available for creditor claims as some property may be exempt under state or federal law.

Question 14

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 exercise any of the Total Finance's rights against Sue is the right of

Accepted Answer

The right of "stepping into the shoes" of a creditor after paying off a debt and exercising their rights against the debtor is known as subrogation. Therefore, the correct answer is D.

Question 15

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

Accepted Answer

The answer of Jay is a surety for Karen's loan...

Question 16

Ross and Sally agree to guarantee Tim's debt.Ross's maximum liability 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 absence of an agreement to the contrary,Ross can recover from Sally

Accepted Answer

The answer of Ross and Sally agree to guarantee Tim's...

Question 17

Carlton files a petition in bankruptcy.One of the goals of bankruptcy law with respect to a debtor is to

Accepted Answer

One of the primary goals of bankruptcy law is to provide the debtor with a fresh start, allowing them to eliminate or reduce their debts and begin anew without the burden of past creditors' claims. This encourages economic growth and overall financial stability. The other options listed (A, B, and D) are not consistent with the broader goals of bankruptcy law.

Question 18

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

Accepted Answer

Jeff is asking the court to order the sale of the mortgaged property, which is a characteristic of a foreclosure. In a foreclosure, the property is sold to satisfy the debt owed to the lender. A deficiency judgment is a court order for the borrower to pay the remaining balance of a debt after the collateral has been sold. A right of reimbursement refers to the right of a co-borrower to be reimbursed by another co-borrower for payments made on a shared debt. Redemption refers to the right of a borrower to reclaim their property after defaulting on a mortgage by paying the full amount owed.

Question 19

Mia's voluntary petition for bankruptcy is found to be proper.The order for relief is effective as soon as

Accepted Answer

The order for relief is effective as soon as the party files the petition for bankruptcy. Therefore, Option A is the correct choice. Option B is incorrect as posting a bond is not a requirement for the order for relief to be effective. Option C is incorrect as creditor agreement is not necessary for the order for relief to be effective. Option D is incorrect as the trustee's role of collecting and distributing the property of Mia's estate comes into place after the order for relief has been issued.

Question 20

Elmo files a petition in bankruptcy.If the court concludes that there are grounds for a finding of "substantial abuse," the court will most likely

Accepted Answer

If the court concludes that there are grounds for a finding of "substantial abuse," the court will dismiss Elmo's petition. This means that the court has determined that Elmo does not need bankruptcy protection and that filing for bankruptcy would be an abuse of the process.

Quiz 21: Creditors Rights and Bankruptcy