Question 1

Fiona borrows $1,000 from Garden State Bank, using her motorcycle as col?lateral. To perfect its security in?terest, the bank must file its financing statement with

Accepted Answer

The answer of Fiona borrows $1,000 from Garden State Bank,...

Question 2

City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for

Accepted Answer

According to the Uniform Commercial Code, a continuation statement can be filed within six months prior to the expiration of a financing statement and extends the effectiveness for an additional five years. Therefore, the financing statement could be extended for a total of 5 years.

Question 3

The payment of Hu's debt to Ian is guaranteed by Hu's personal prop?erty. To give notice of his interest in Hu's property to other creditors, Ian is most likely to

Accepted Answer

Filing a financing statement is the appropriate way for Ian to give notice of his interest in Hu's property to other creditors. This is done to establish a security interest, giving the creditor priority in case of default or bankruptcy. Attaching a label or publishing a notice in a newspaper will not provide sufficient legal protection. E-mailing potential creditors is not a recognized way to give notice under the Uniform Commercial Code.

Question 4

Saf-T Lenders, Inc., takes possession of Tiara's stock in Urgent Care Corporation to perfect Saf-T's security interest in the stock. This is

Accepted Answer

Taking possession of stock as collateral is a pledge, where the debtor retains ownership of the collateral but gives possession to the lender as security for a debt. After-acquired property refers to property acquired after the security interest is created, purchase-money security interest refers to security interest created to finance the purchase of the collateral, and violating state laws is not a valid option.

Question 5

Khalil holds a security interest in inventory owned by Luc. Khalil pro?tects his claim to the inventory in the event of Luc's default by

Accepted Answer

Perfection means taking steps to put the security interest on public record to provide notice to third parties. This protects Khalil's claim in the inventory in the event of default by Luc. Choice A (assignment) involves transferring ownership and is not relevant in this scenario. Choice C (redemption) involves paying off a debt to reclaim property and is also not relevant in this scenario. Choice D (retention) does not provide any additional protection for Khalil's security interest.

Question 6

Kathy is the secured party in a transaction with Julie, who is the debtor. The collateral is a 2007 Chevrolet F150 pick-up truck. Kathy files a financing statement in which she describes the collateral as "a vehicle." To perfect Kathy's interest this is

Accepted Answer

The description of the collateral as "a vehicle" is not sufficiently specific to perfect Kathy's interest. The UCC requires that the description of the collateral in a financing statement be reasonably specific to identify it, such as including the make, model, and year of the vehicle. Without this level of specificity, a search of the financing statement by a potential buyer or creditor may not result in the identification of Kathy's secured interest in the Chevrolet F150.

Question 7

Olaf is the creditor in a transaction with Phil. Once certain require?ments are met, Olaf's rights will attach, which means that Olaf will have

Accepted Answer

Olaf is a creditor who is likely lending money to Phil. In this scenario, Olaf has a security interest in Phil's property. Once certain requirements are met, Olaf's rights will "attach" and he will be able to enforce his interest. This means that he could potentially seize Phil's property to satisfy the debt if Phil defaults on his loan. Option A is incorrect because Olaf does not have an ownership right to Phil's property. Option C is incorrect because while Phil's property may be marked with a notice, this is not the main effect of Olaf's security interest. Option D is incorrect because Olaf does not need court permission to seize Phil's property if he has a valid security interest.

Question 8

Valley Furniture Store sells household consumer goods on credit for which Valley files a financing statement to perfect a security interest in the goods. With the filing of subsequent continuation statements, the ef?fectiveness of the statement can be continued

Accepted Answer

With the filing of subsequent continuation statements, the effectiveness of the financing statement can be continued indefinitely.

Question 9

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

Accepted Answer

Filing a financing statement with the appropriate authority (such as the UCC filing office in the state where John's property is located) establishes Kirsten's priority over other creditors who may claim an interest in the same property. This provides a level of security for Kirsten in case John defaults on the debt. Option A is not a valid method of perfecting a security interest, and options B and C are irrelevant to perfecting Kirsten's interest in John's property.

Question 10

The payment of Paul's debt to Ryan is guaranteed by Paul's 2002 Honda Civic. Ryan filed the financing statement on July 1, 2012. If Ryan does nothing else, the financing statement will be effective until

Accepted Answer

The answer of The payment of Paul's debt to Ryan...

Question 11

Sally is the secured party in a transaction with Lilly, who is the debtor. Sally files a financing statement with the appropriate state official. The financing statement must contain

Accepted Answer

The financing statement must contain the debtor's name and address, a description of the collateral, and the secured party's name and address. It does not require the debtor's signature or credit report, nor does it require the secured party's bank account information or a photograph of the collateral.

Question 12

Joan borrows money from Jake under a security agreement. After borrowing the money, Joan buys a new kayak. The kayak is considered

Accepted Answer

After-acquired property refers to property obtained by a debtor after a security agreement has already been established. In this scenario, Joan buying a new kayak after borrowing money from Jake falls under after-acquired property.

Question 13

The payment of Yves's debt to Zac is guaranteed by Yves's personal property. Their agreement identifies Yves's property by serial number. To establish Zac's interest, this is most likely

Accepted Answer

Identifying Yves's property by serial number provides accurate and specific information about the collateral, making it sufficient to establish Zac's interest. However, it is important to ensure that the identified property is actually owned by Yves and can be used as collateral for the debt.

Question 14

Corporate Bank wants to perfect its security interest in inventory owned by Outdoor Outfitters, Inc. Most likely, a financing statement should be filed with

Accepted Answer

Filing a financing statement with the secretary of state is the best choice, as this will give notice to the public of the bank's security interest in Outdoor Outfitters' inventory. The county clerk's office may also accept financing statements, but they are not always responsible for maintaining government records related to business entities. The U.S. Department of the Interior would have no involvement in this transaction. The bank manager may have access to the necessary forms, but they do not have the authority to file the financing statement on behalf of the bank.

Question 15

Jim files a uniform financing statement giving notice to the public that he has a secured interest in collateral belonging to Phil, who is the debtor named in the statement. This uniform statement form is now used in

Accepted Answer

The Uniform Commercial Code (UCC) governs commercial transactions in the United States and has been adopted by all states. One of the provisions in the UCC is the requirement for a Uniform Commercial Code-1 (UCC-1) financing statement, which is used to establish a creditor's interest in a debtor's property. This statement is used in all states and is the standard form for filing a financing statement. Therefore, option A is correct.

Question 16

Clear Lake Credit Corporation lends funds to Donny, a consumer, to apply to the cost of a boat, which is the collateral for the loan. An enforceable security interest requires

Accepted Answer

Under the Uniform Commercial Code (UCC), a security interest may be created by a written agreement, or by Clear Lake's possession of the boat, as long as there is an intent to create a security interest. Therefore, choice B is the correct answer. Choice A is incorrect because possession of the collateral is one way to create a security interest, but it is not the only way. Choice C is also incorrect because the boat seller's acknowledgement is not required to create a security interest. Choice D is incorrect because the lender generally needs to possess the collateral to create a security interest, not the borrower.

Question 17

Angie borrows $20,000 from First Line Credit using a field of timber trees as collateral. To perfect its security interest, First Line Credit must file its financing statement with

Accepted Answer

The answer of Angie borrows $20,000 from First Line Credit...

Question 18

The payment of Jose's debt to Klint is guaranteed by Jose's personal property. The process by which Klint can protect himself against the claims of third parties to this property is

Accepted Answer

Perfection is the process by which a creditor protects their interest in collateral against the claims of third parties. In this case, Klint can perfect his interest in Jose's personal property, which guarantees the payment of his debt, by filing a financing statement with the appropriate government agency. This gives notice to other potential creditors that Klint has a prior interest in Jose's personal property and allows him to enforce his rights against it in the event of a default. Attachment is the process by which a creditor obtains a lien on a debtor's property to secure a debt, while default refers to a failure to perform a contractual obligation. Termination is not applicable in this context.

Question 19

The payment of Eden's debt to Flem is guaranteed by Eden's personal property. This property is

Accepted Answer

Eden's personal property serves as collateral for the payment of the debt, which means it is subject to a security interest held by Flem. Therefore, the correct term for this is collateral. The other options do not fully capture the nature of Eden's property in relation to the debt and the security interest involved.

Question 20

Everyday Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. Everyday has a security interest in the new inventory

Accepted Answer

If the security agreement included an after-acquired property clause, Everyday Loans, Inc. would have a security interest in any new inventory acquired by Glade Electronics Corporation.

Quiz 23: Security Interests in Personal Property