Deck 33: Creditors Rights and Remedies

Question 1

No state allows a defaulting debtor to redeem the property before a sale under writ of execution.

Answer 1

False

Question 2

To use attachment as a remedy,a creditor must have an enforceable right to payment of the debt.

Answer 2

True

Question 3

An employee cannot be discharged due to a garnishment order.

Answer 3

True

Question 4

In some states,a judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.

Question 5

A writ of execution is a writ that puts in force a court decree or judgment.

Question 6

A default occurs when a debtor fails to pay a creditor as promised.

Question 7

If a debtor does not pay a mechanic's lien,the debtor's property can be sold to satisfy the debt.

Question 8

When a debtor fails to pay for labor and materials furnished for the repair or improvement of personal property,a creditor can recover payment through a mechanic's lien.

Question 9

If a creditor wins a judgment against a debtor and the debtor will not or cannot pay the amount due,the dispute is at an end.

Question 10

An employer can refuse to turn over a debtor's wages.

Question 11

Federal law alone governs garnishment actions.

Question 12

Liquidated debts are debts that are indefinite,or not fixed,in amount.

Question 13

A creditor's composition agreement may be entirely enforceable.

Question 14

There is no limit to the amount that can be taken from a debtor's weekly take-home pay through garnishment.

Question 15

A lien is an encumbrance on property to satisfy a debt or protect a claim for the payment of a debt.

Question 16

An artisan's lien is effective only if a creditor has possession of the property.

Question 17

In a suretyship relationship,a third person's credit becomes the security for a debt.

Question 18

An attachment is a court-ordered seizure and taking into custody of property before a judgment is obtained on a past-due debt.

Question 19

An artisan's lien is a security device created at statutory law through which a creditor can recover payment for labor and materials used to increase the value of real property.

Question 20

An artisan's lien is possessory.

Question 21

A guarantor can be required to pay an obligation only after the principal debtor defaults.

Question 22

A creditor can demand payment from the surety BEFORE the debt is due.

Question 23

A guarantor is secondarily liable on an obligation.

Question 24

A surety can use any defenses available to a debtor to avoid liability on the debt.

Question 25

If a creditor surrenders collateral to the debtor without the consent of the guarantor,this can reduce the obligation of the guarantor.

Question 26

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.

Question 27

In a few states,statutes allow the homestead exemption only if the judgment debtor has a family.

Question 28

Francis performs a contract with Genie to add a garage to Genie's property,but Genie does not pay.Francis can file a lien on Genie'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.

Question 29

A homestead exemption allows a debtor to subtract the value of the family home from the amount of a debt. 

Question 30

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.

Question 31

A creditor must exhaust all legal remedies against the principal debtor before holding the surety responsible for payment.

Question 32

Foreclosure is the legal process by which a lender repossesses and auctions off property that has secured a loan.

Question 33

A surety is primarily liable for the debt of a principal.

Question 34

Recording a mortgage ensures that a creditor is officially on record as holding an interest in mortgaged property.

Question 35

Certain types of property are exempt from writs of execution or attachment.

Question 36

If a homeowner defaults,or fails to make the mortgage payments,the lender has the right to foreclose on the mortgaged property.

Question 37

A guaranty contract must always be in writing to be enforceable.

Question 38

A debtor's vehicle is never exempt from satisfaction of a judgment debt.

Question 39

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) ​a violation of most states' laws.

Question 40

Portia owes Bon $500 on their contract,but refuses to pay.To collect,Bon files a mechanic's lien,under which security for the debt is represented by 

A) ​Portia's personal property. 
B) ​Portia's real estate. 
C) ​the $500 owed under the contract. 
D) ​the contract.

Question 41

Fact Pattern 33-1Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 33-1.If Robin is a guarantor,then the guaranty is required to be in writing because of 

A) ​the debtor's right of redemption. 
B) ​the co-signer's right of contribution. 
C) ​the creditor's transfer of possession. 
D) ​the Statute of Frauds.

Question 42

​Helen's debt to Imprints Printers is past due.Imprints obtains a judgment against Helen,but she refuses 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.

Question 43

Fleet Trucking,LLC,buys a white van from Go Motors,Inc.,on credit under a guaranty signed by Herbie,Fleet's president,making him personally liable if the company does not pay.Herbie is 

A) ​a surety. 
B) ​a lienor. 
C) ​a guarantor. 
D) ​a creditor.

Question 44

Julia owes Ryan $10,000.When the debt comes due,Julia refuses to pay.Ryan obtains a judgment against Julia to collect the debt,but she still refuses to pay.Using a writ of execution,the court orders the sheriff to seize Julia's boat and sell it to pay the debt.The boat sells for $15,000.Ryan will receive 

A) ​$15,000 and Julia will receive nothing. 
B) ​$10,000 and Julia will receive $5,000. 
C) ​$7,500 and Julia will receive $7,500. 
D) ​$10,000 and the court will receive $5,000.

Question 45

Fact Pattern 33-1Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 33-1.If Tina signs the application only after language is included that requires Petro to exhaust its legal remedies against Slick before looking to her,then Tina is 

A) ​a surety. 
B) ​a lienor. 
C) ​a guarantor. 
D) ​a creditor.

Question 46

Fact Pattern 33-1Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 33-1.If,after the loan agreement is signed,Slick agrees to a higher rate of interest without telling Tina,then Tina is 

A) ​discharged from the agreement. 
B) ​liable at the higher rate of interest. 
C) ​liable at the lower rate of interest. 
D) ​liable for the principal only.

Question 47

Fact Pattern 33-1Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 33-1.If Tina signs the application but fails to condition her signature on Petro's agreement to pursue its legal remedies against Slick before looking to her,then Tina is 

A) ​a surety. 
B) ​a lienor. 
C) ​a guarantor. 
D) ​a creditor.

Question 48

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.

Question 49

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.

Question 50

Friendly Credit Corporation (FCC)believes that Gary may dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment.FCC may ask a court to issue a writ of 

A) ​attachment. 
B) ​contribution. 
C) ​execution. 
D) ​redemption.

Question 51

Countryside Bank provides Dhani with a standard mortgage with an unchanging rate of interest to buy a home.Payments on the loan remain the same for the duration of the mortgage.This is 

A) ​a fixed-rate mortgage. 
B) ​an adjustable-rate mortgage. 
C) ​a workout agreement. 
D) ​a violation of the law.

Question 52

Bertram,Chaka,and Dougal are co-sureties of Erica's debt to Finance Loan Company.Bertram pays Erica's entire debt.Bertram's right to seek proportionate payments from Chaka and Dougal is the right of 

A) ​contribution. 
B) ​exemption. 
C) ​reimbursement. 
D) ​subrogation.

Question 53

Consumer Credit,Inc.(CCI),lends $1,000 to Joe.Kay acts as Joe's surety.If Kay pays the loan,she gets 

A) ​any right that CCI had against Joe, but not a right to be repaid by Joe. 
B) ​a right to be repaid by Joe, but not any right that CCI had against Joe. 
C) ​any right that CCI had against Joe and a right to be repaid by Joe. 
D) ​none of the choices.

Question 54

Jay is a surety for Karen's loan from Little Bank.Jay's right to be reimbursed by Karen after having paid her debt is the right of 

A) ​contribution. 
B) ​redemption. 
C) ​reimbursement. 
D) ​subrogation.

Question 55

Lenders Loan Company and Mortgage Service Corporation-Nadya's creditors-contract with Nadya for the discharge of her liquidated debts on payment of a lesser sum.This is 

A) ​a composition agreement. 
B) ​a subrogation. 
C) ​a suretyship agreement. 
D) ​in violation of most states' laws.

Question 56

Raoul is a surety for Suzu's loan from Turnkey Credit,Inc.Raoul's right to "step into the shoes" of Turnkey,after paying Suzu's debt,and exercise any of the Turnkey's rights against Suzu is the right of 

A) ​contribution. 
B) ​redemption. 
C) ​reimbursement. 
D) ​subrogation.

Question 57

Oliver borrows money from Peerless Loan Company.For Peerless to obtain a writ of execution,Oliver must 

A) ​be unable or refuse to pay the amount of a judgment. 
B) ​be unable to redeem Oliver's exempt property. 
C) ​notify Imprints in writing (in a "writ") of his intent. 
D) ​surrender possession of his property to a court.

Question 58

Maggie is a surety for Juli's debt to Bill.Bill and Juli decide to make material changes to the original contract without consulting Maggie.Maggie is 

A) ​still bound by the contract. 
B) ​discharged completely. 
C) ​still bound by the contract, but can make her own changes to it. 
D) ​still bound by the contract unless she objects within thirty days.

Question 59

Nell's debt to Olsen is past due.Olsen obtains an order of garnishment to require Nell's employer Pro Transmission Service,Inc.,to pay part of Nell's paycheck to Olsen.The law 

A) ​limits the amount that can be taken from Nell's take-home pay. 
B) ​permits Olsen to dismiss Nell because her wages are garnished. 
C) ​practically does not allow Olsen to collect the awarded amount. 
D) ​requires Pro to retain Nell as an employee until the debt is paid.

Question 60

Elvin fraudulently induces Frank,a consumer,to sign a promissory note to buy a speedboat.Elvin sells the note to Gaston,who takes it for value,in good faith,and without knowledge of the fraud.With respect to the defense against payment on the note to Elvin,Frank can 

A) ​assert this defense against Gaston. 
B) ​file for a property exemption. 
C) ​exercise the right of subrogation. 
D) ​obtain a deficiency judgment.

Question 61

Ridgeline Bank provides Shirley with a mortgage to buy a home.The rate of interest is fixed for three years and then adjusts annually.This is 

A) ​a fixed-rate mortgage. 
B) ​an adjustable-rate mortgage. 
C) ​a creditor's composition agreement. 
D) ​a guaranty agreement.

Question 62

Fact Pattern 33-2Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 33-2.If Nina recovers less than she is owed,she can realize the difference from 

A) ​any property that Mary owns. 
B) ​only exempt property that Mary owns. 
C) ​only nonexempt property that Mary owns. 
D) ​property that any other member of Mary's family owns.

Question 63

George borrows funds from Hometown Credit Union (HCU)to buy real property.George signs a written instrument that gives HCU an interest in the property as security for the debt's payment.This is​ 

A) ​a mortgage. 
B) ​an artisan's lien. 
C) ​a workout agreement. 
D) ​a suretyship arrangement.

Question 64

A pipe in Gert's house springs a leak.Gert contracts with Holly's Plumbing & Construction Company to repair the pipe and fix the damage to Gert's house.Gert pays 10 percent of the price in advance.Holly's does the work,but Gert refuses to pay the rest of the price.What can Holly's do,and how is it done?

Question 65

Laurel borrows $150,000 from Marketplace Mortgage Loans to buy a home.The financing documents require Laurel to maintain the property,obtain homeowners' insurance,and pay all property taxes and other assessments through the lender.With respect to these terms,a court is most likely to 

A) ​enforce them. 
B) ​refuse to enforce them. 
C) ​rescind them. 
D) ​rewrite them.

Question 66

Fact Pattern 33-2Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 33-2.Other property Mary may own that may be exempt from satisfaction of judgment debts includes 

A) ​any property that Mary wishes to exempt. 
B) ​investments that Mary has made in her family's businesses. 
C) ​recreational vehicles that Mary uses on weekends. 
D) ​tools that Mary uses in her trade.

Question 67

Smartt Software Company borrows $10,000 from Term 'N All Loans,Inc.,but cannot repay the loan when it comes due.Term 'N All refuses to extend the time for repayment unless Smartt can provide an acceptable surety.Uno Venture Corporation agrees to act as a surety for the loan after Smartt offers the firm a discount on software and shows Uno financial statements,compiled with Term 'N All's assistance,that misrepresent Smartt's financial situation.Later,after Uno uses the discount to buy software,Smartt again defaults on repayment of the loan,and Term 'N All files a suit against Uno to collect the amount of the debt.Is Uno liable? Why or why not?

Question 68

Fact Pattern 33-2Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 33-2.Mary will receive 

A) ​$0. 
B) ​$30,000. 
C) ​$50,000. 
D) ​$60,000.

Question 69

Dana defaults on a debt to Rachel.Rachel will NOT be able to recover the debt from 

A) ​the sale of Dana's prize winning pet dog. 
B) ​the sale of Dana's investments in stocks. 
C) ​Dana's wages. 
D) ​Dana's lottery winnings.

Question 70

Daphne defaults on a debt to Country Loan Corporation (CLC).As a creditor,CLC can place liens on all of Daphne's property except​ 

A) ​motor vehicles used to commute to work. 
B) ​stock in various corporations. 
C) ​items that the debtor selects. 
D) ​vacant commercial property.

Question 71

Vito borrows $110,000 from Watershed Bank to buy a home.If he fails to make payments on the mortgage,the bank has the right to repossess and auction off the property securing the loan.This is 

A) ​attachment. 
B) ​execution. 
C) ​foreclosure. 
D) ​redemption.

Question 72

Fact Pattern 33-2Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 33-2.Nina may recover 

A) ​$0. 
B) ​$30,000. 
C) ​$50,000. 
D) ​$60,000.