Deck 24: Other Creditors Remedies and Suretyship

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

A mechanic's lien is possessory.

Question 7

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

Question 8

A mechanic's lien can be enforced to obtain payment for work that adds value to real property.

Question 9

Once a writ of execution has been issued, the debtor cannot pay the judgment and redeem the property until after a sale has taken place.

Question 10

A writ of execution applies to a debtor's nonexempt real or personal property wherever located.

Question 11

Federal law governs garnishment actions.

Question 12

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

Question 13

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

Question 14

Liens usually do not take priority over other claims against the same property.

Question 15

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

Question 16

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 17

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

Question 18

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

Question 19

A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor.

Question 20

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 21

Kendall performs a contract with Lainie to add a covered porch and a pool deck to Lainie's house, but Lainie does not pay. Kendall notifies Lainie that the property will be sold to satisfy the debt. This is

A) a judicial lien.
B) a mechanic's lien.
C) an artisan's lien.
D) a violation of most state laws.

Question 22

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

Question 23

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 24

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

Question 25

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

Question 26

A creditor's composition agreement may be entirely enforceable.

Question 27

A surety can never assert fraud as a defense.

Question 28

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

Question 29

Builders Construction Company performs a contract with Christina to add a sun porch to her house, but she does not pay. In most states, Builders Construction could create a lien and place it on Christina's property by filing

A) a creditor's composition agreement.
B) a writ of attachment.
C) a writ of execution.
D) a written notice of lien.

Question 30

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

Question 31

When a surety or guarantor pays a debt owed to a creditor, he or she acquires any right that the creditor had against the debtor.

Question 32

A surety cannot assert the principal debtor's bankruptcy as a defense to avoid liability on the debtor's obligation.

Question 33

Creditors can agree with a debtor to discharge the debtor's debts on payment of a sum less than that owed.

Question 34

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 35

A surety can assert the debtor's bankruptcy as a defense.

Question 36

A guarantor is secondarily liable on an obliga?tion.

Question 37

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

Question 38

A material change in a loan contract between a creditor and a debtor dis?charges a surety only to the extent that the surety suffers a loss.

Question 39

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

Question 40

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

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

Question 41

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 42

Fact Pattern 24-1
Petro 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 24-1. If Robin is a guarantor, then the guaranty is re?quired 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 43

Michael contracts with Jill to fix the brakes on her Honda Civic. Jill leaves her car with Michael, but refuses to pay when the work is done. Michael refuses to return the car until she pays. Michael's lien on Jill's car will end

A) in thirty days.
B) in sixty days.
C) when Michael voluntarily surrenders possession of the car.
D) when Jill obtains a court order requiring Michael to return the car.

Question 44

A court awards a judgment to Alice, who is the creditor, against Ada, who is the debtor. After the judgment, Alice requests a court order to seize Ada's property to ensure that the judgment will be collectible. This is

A) a judicial lien.
B) a writ of attachment.
C) a writ of execution.
D) a violation of most state laws.

Question 45

Fact Pattern 24-1
Petro 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 24-1. 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 46

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 47

Oliver borrows money from Peerless Loan Company. For Peerless to obtain a writ of execu?tion, 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 48

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 allowed to make additional changes to the contract.
D) still bound by the contract unless she contests it within 30 days of the changes.

Question 49

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 50

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie 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 51

Portia owes Bon $500 on their roof repair contract, but refuses to pay. To collect, Bon files a me?chanic's lien. Under a mechanic's lien, security for the debt is repre?sented by

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

Question 52

Ronald's debt to Greg is past due. Ronald obtains a judgment against Greg to collect the debt, but Greg will not pay. Ronald requests a writ of execution. The property that is seized under the writ of execution must be

A) in Ronald's possession.
B) in Greg's possession.
C) in the possession of Greg's employer or other third party.
D) located within the court's geographic jurisdiction.

Question 53

Muffins-2-Go buys a truck from Street Vehicles, Inc., under a contract signed by Riley, Muffins-2-Go's president, making him personally liable if Muffins-2-Go does not pay the loan. Riley is

A) a guarantor.
B) a surety.
C) a co-surety.
D) a co-creditor.

Question 54

Fact Pattern 24-1
Petro 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 24-1. If Tina signs the application but fails to con?di?tion 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 55

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 56

Fact Pattern 24-1
Petro 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 24-1. If Tina signs the application only after lan?guage 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 57

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 58

Helene's debt to Imprints Printers is past due. Imprints obtains a judgment against Helene, but she refuses to pay it. Imprints asks the court for an order that directs the sheriff to seize and sell any of Helene'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 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

William is a surety for Jeannie's loan from Richard. Richard knows of William's existence. When the loan comes due, Jeannie tries to pay Richard, but Richard rejects the payment. William is

A) released from any obligation on the debt.
B) required to pay the amount of the debt to Richard.
C) required to pay up to half of the amount of the debt to Richard.
D) required to pay the amount of the debt to Jeannie.

Question 61

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 62

Fact Pattern 24-2
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 24-2. Nina may recover

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

Question 63

A pipe in Gert's house springs a leak. Gert contracts with Holly's Plumbing & Construction Company to repair the pipe and fix the dam?age 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 64

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

Question 65

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 66

Abner owes Borrowers Bank $15,000 but refuses to pay. Borrowers wants to ob?tain a garnishment order and serve it on Abner's employer, Café de Jeuner. What is the procedure for obtaining a garnishment order? Is one order enough to garnish all of Abner's wages for each pay period until the debt is paid? Can Abner's employer dismiss him due to the garnishment?

Question 67

Fact Pattern 24-2
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 24-2. 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 68

Fact Pattern 24-2
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 24-2. Mary will receive

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

Question 69

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 pay?ments from Chaka and Dougal is the right of

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

Question 70

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 ex?er?cise any of the Turnkey's rights against Suzu is the right of

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

Question 71

Drew and Earl are brothers. They agree to act as guarantors on a loan made by their sister, Flo. Flo defaults on the payments and Drew re?fuses to pay. Earl pays the debt. Earl can recover from

A) Drew and Flo under the right of proportionate liability.
B) Drew and Flo under the right of reimbursement.
C) Drew under the right of contribution and Flo under the right of subrogation.
D) no one, because the parties are brothers and sister.

Question 72

Fact Pattern 24-2
Mary's home is in a state that has a $30,000 homestead exemption. Mary de?faults on a $60,000 debt that she owes to Nina. Mary's home is sold at auc?tion for $80,000.
Refer to Fact Pattern 24-2. Other property Mary may own that may be ex?empt 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.