Deck 13: Credit, Secured Transactions, and Bankruptcy

Question 1

In a mortgage transaction,the creditor is known as the mortgagee.

Answer 1

True

Question 2

Personal property that is subject to a security agreement is known as ________.

Answer 2

collateral

Question 3

A creditor who relies on collateral to secure payment is known as an unsecured creditor.

Answer 3

False

Question 4

A lien release can be used by the property owner to defeat a statutory lienholder's attempt to obtain payment.

Question 5

Unsecured credit requires collateral to protect the payment of the debt.

Question 6

Tangible personal property includes securities,patents,trademarks,and copyrights.

Question 7

________ is a form of credit that does not require any security to protect the payment of the debt.

Question 8

In a secured credit transaction,the creditor cannot recover the collateral despite the debtor's defaults on the loan.

Question 9

The lender in a credit transaction is known as the ________.

Question 10

If a debtor is judgment-proof,the creditor may never collect the debt owed.

Question 11

A(n)________ is an instrument that evidences a borrower's debt to the lender for a real property.

A)note
B)consignment
C)accommodation
D)deed of trust

Question 12

The property in which a security interest is taken is called collateral.

Question 13

Ashton borrows $25,000 from Amanda,who lends the money without taking an interest in collateral for the loan.Amanda is relying on Ashton's credit standing when she made the loan.In this case,what kind of creditor is Amanda?

A)an unsecured creditor
B)a secured creditor
C)an administrative claim creditor
D)a post-petition creditor

Question 14

A(n)________ is an instrument that gives the creditor a security interest in the debtor's property that is pledged as collateral.

Question 15

A ________ is an instrument that gives a creditor a security interest in the debtor's real property that is pledged as collateral for a loan.

A)credit report
B)letter of credit
C)note
D)deed of trust

Question 16

A deficiency judgment prevents a secured lender from recovering other property or income from a defaulting debtor if the collateral is insufficient to repay the unpaid loan.

Question 17

When is a creditor referred to as a secured creditor?

A)when the creditor has been guaranteed payment by a trustee
B)when the creditor gives a loan without security
C)when the creditor has been repaid the debt
D)when the creditor has acquired collateral

Question 18

Distinguish between secured and unsecured credit.

Question 19

An arrangement where an owner of real property borrows money from a lender and pledges the real property as collateral to secure the repayment of the loan is known as ________.

A)consignment
B)foreclosure
C)a mortgage
D)an assignment

Question 20

An improperly recorded mortgage or deed of trust is effective against subsequent purchasers of the subject real property.

Question 21

Perfection by investment of collateral is one of the methods of perfecting a security interest under the Uniform Commercial Code (UCC).

Question 22

A contractor's,laborer's,and material person's statutory lien that makes the real property to which services or materials have been provided security for the payment of the services and materials is known as a ________.

A)material lien
B)judgment lien
C)tax lien
D)construction lien

Question 23

A situation in which the value of the creditor's collateral is insufficient to satisfy the debt is called attachment.

Question 24

To be valid,a security agreement must set forth the creditor's rights upon the debtor's default.

Question 25

A(n)________ refers to a security interest in property that was not in the possession of the debtor when the security agreement was executed.

A)floating lien
B)after-acquired property
C)attachment
D)future advance

Question 26

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

A)two-party secured
B)three-party secured
C)perfected
D)attached

Question 27

________ is a situation in which a creditor agrees to extend credit only if the purchaser pledges some personal property as collateral for the loan.

A)A floating lien
B)Attachment
C)A mortgage
D)Secured credit

Question 28

A ________ refers to a document filed by a secured creditor with the appropriate government office that constructively notifies the world of his or her security interest in personal property.

A)security disclosure
B)financing statement
C)possession statement
D)custodial statement

Question 29

When a creditor extends credit to a debtor and takes a security interest in some personal property of the debtor,it is called a ________.

A)super-priority lien
B)collateral claim
C)collateral disposition
D)secured transaction

Question 30

To which of the following type of mortgages does the antideficiency statute apply?

A)foreign currency mortgages
B)home improvement mortgages
C)first purchase money mortgages
D)second purchase money mortgages

Question 31

________ is a process that establishes the right of a secured creditor against other creditors who claim an interest in the collateral.

A)Disposition of collateral
B)Retention of collateral
C)Perfection of a security interest
D)Repossession of a security interest

Question 32

Which article of the Uniform Commercial Code (UCC)governs secured transactions in personal property?

A)Article 8
B)Article 9
C)Article 18
D)Article 19

Question 33

A ________ statute requires a mortgage or deed of trust to be recorded in the county recorder's office of the county in which the real property is located.

A)recording
B)real property
C)mortgage
D)compilation

Question 34

If a worker in the ordinary course of business furnishes services or materials to someone with respect to goods and receives a lien on the goods by statute,this is known as a(n)________ lien.

A)subordinate
B)floating
C)artisan's
D)judgment

Question 35

Article 9 of the Uniform Commercial Code (UCC)governs secured transactions in personal property.

Question 36

Perfection of a security interest establishes the right of a secured creditor against other creditors who claim an interest in the collateral.

Question 37

Which of the following has the highest priority claim?

A)the first party to secure the interest
B)the first party to attach the interest
C)the first party to possess the interest
D)the first party to file a financing statement

Question 38

A purchase money security interest is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Question 39

A floating lien is a security interest in property that was not in the possession of the debtor when the security agreement was executed.

Question 40

A ________ is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

A)purchase money security interest
B)cumulative security interest
C)future advance monetary interest
D)default interest

Question 41

A(n)________ transaction occurs when a seller sells goods to a buyer who has obtained financing from a third-party lender that takes a security interest in the goods sold.

Question 42

A(n)________ is a document required to be filed by an equity security holder that states the nature and amount of his or her interest against the debtor.

A)proof of claim
B)proof of interest
C)voluntary petition
D)involuntary petition

Question 43

The surety is primarily liable for paying the principal debtor's debt when it is due in a surety arrangement.

Question 44

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash,the cash is distributed to the creditors,and any unpaid debts are discharged.

A)An abusive filing
B)Dissolution of debt
C)Liquidation
D)Reorganization

Question 45

If a third party promises to be primarily liable for the payment of the borrower's debt,this is referred to as ________.

A)garnishment
B)subrogation
C)a surety arrangement
D)a guaranty arrangement

Question 46

Under the ________ test,debtors who earn a median family income equal to or below the state's median family income for the size of the debtor's family qualify for Chapter 7 bankruptcy.

A)liquid assets
B)tangible holdings
C)median income
D)propensity to repay

Question 47

What is a homestead exemption?

A)an investment in realty that a debtor must forfeit
B)equity in a home that a debtor is permitted to retain
C)a remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims
D)all of the debtor's assets converted to cash

Question 48

Distinguish between two-party and three-party secured transactions with examples.

Question 49

In a(n)________ arrangement,a third party promises to be primarily liable with the borrower for the payment of the borrower's debt.

Question 50

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

A)discharge of debt
B)composition
C)automatic stay
D)order for relief

Question 51

In a guaranty agreement,the guarantor is primarily liable on the debt.

Question 52

________ refers to an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Question 53

Which of the following is true of Chapter 7 liquidation?

A)The debtor is not permitted to keep any of his or her assets.
B)The 2005 bankruptcy act has eased the process of applying for Chapter 7 bankruptcy.
C)The debtor's future income cannot be reached to pay the discharged debt.
D)Petitioning for Chapter 7 liquidation does not permit the debtor to petition for bankruptcy under any other chapter.

Question 54

Which of the following is true of a guarantor in a guaranty arrangement?

A)The guarantor is secondarily liable on the debt.
B)The guarantor must pay the debt even if the principal debtor is not in default.
C)The creditor can first seek legal remedy from the guarantor.
D)The guarantor has full legal rights to possession of the real property in this type of arrangement.

Question 55

Outline the priority of claims in secured and unsecured transactions.

Question 56

In a(n)________ arrangement,a third party promises to be secondarily liable for the payment of another's debt.

Question 57

Which of the following is true about the surety's liability to pay in a surety arrangement?

A)The surety is secondarily liable for payment.
B)The surety is primarily liable for payment.
C)The principal debtor must be in default before the surety can be approached.
D)The creditor can only approach the surety as a last resort.

Question 58

Chapter 7 of the Bankruptcy Code primarily deals with ________.

A)debt reorganization
B)adjustment of debts of a family farmer or fisherman with regular income
C)adjustment of debts of an individual with regular income
D)liquidation

Question 59

________ is a rehabilitation form of bankruptcy that permits a bankruptcy court to supervise the debtor's plan for the payment of unpaid debts in installments over the plan period.

A)Chapter 7
B)Chapter 9
C)Chapter 12
D)Chapter 13

Question 60

The term ________ refers to a security interest in property that was not in the possession of the debtor when the security agreement was executed.

Question 61

An automatic stay provides for which of the following?

A)the automatic discharge of secured debts
B)the suspension of certain legal actions against the debtor
C)a creditor's foreclosure on an asset pledged as collateral for a loan
D)the automatic discharge of unsecured debts

Question 62

The term ________ refers to a document required to be filed by a creditor that states the amount of his or her claim against the debtor.

Question 63

Explain the Chapter 11 plan of reorganization.

Question 64

What is an executory contract?

A)a contract that cannot be discharged under Chapter 13
B)a contract that the debtor is obligated to perform despite filing for bankruptcy
C)a contract between several creditors and a single debtor which stipulates equitable division of the debtor's property
D)a contract that has not been fully performed

Question 65

A contract or lease that has not been fully performed is termed as a(n)________ contract.

Question 66

Chapter 7 of the Bankruptcy Code deals with the ________ form of bankruptcy.

Question 67

Gifts that a debtor is entitled to receive within 180 days after the petition is filed are part of the bankruptcy estate.

Question 68

Liquidation is a form of bankruptcy in which the debtor's exempt property is auctioned.

Question 69

A(n)________ provides for the reduction of a debtor's debts.

A)extension
B)liquidation
C)limitation
D)composition

Question 70

Bankruptcy courts are part of the state court system.

Question 71

________ income is defined as current monthly income less amounts reasonably necessary to be expended for the maintenance or support of the debtor and the dependants of the debtor.

A)Disposable
B)Discernible
C)Fungible
D)Tangible

Question 72

If unsecured creditors do not agree to a plan of reorganization,the court can use its ________ and make the dissenting class accept the plan.

Question 73

Chapter 13 of the Bankruptcy Code permits a qualified debtor to propose a plan to pay all or a portion of the debts he or she owes in installments over a specified period of time.

Question 74

Chapter 11 of the Bankruptcy Code deals with the ________ form of bankruptcy.

Question 75

Explain in brief the composition of a bankruptcy estate.

Question 76

A voluntary petition is a petition filed by a creditor that states that the debtor has debts.

Question 77

An executory contract refers to a contract or lease that has not been fully performed.

Question 78

Which of the following is the goal of Chapter 11?

A)equitable distribution of the bankruptcy estate to all creditors
B)strict distribution of the bankruptcy estate according to the statutorily-prescribed order of distribution to creditors
C)discharge of the debtor's unsecured debts and payment of secured debts
D)a proposed new capital structure for the debtor to assume when it emerges from bankruptcy

Question 79

Which of the following bankruptcy methods allows the reorganization of the debtor's financial affairs under the supervision of the bankruptcy court?

A)Chapter 7
B)Chapter 9
C)Chapter 11
D)Chapter 12

Question 80

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.