Deck 13: Credit, Secured Transactions, and Bankruptcy

Question 1

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

A) debtor
B) creditor
C) debtee
D) surety

Answer 1

creditor

Question 2

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

A) collateral
B) mortgage
C) deed
D) intangible assets

Answer 2

collateral

Question 3

Max borrowed money from Mabel. Max would be considered the ________.

A) debtor
B) creditor
C) debtee
D) surety

Answer 3

debtor

Question 4

In making a decision of whether to issue a loan to a consumer, an unsecured creditor may consider a number of factors. Which of these is NOT a factor that a creditor would normally consider?

A) the consumer's credit history
B) the consumer's income
C) the consumer's other assets
D) the consumer's voting history

Question 5

Michael has borrowed $100,000 from his bank. If Michael fails to make payments on his loan, the bank can sue Michael. However, because Michael has no income and owns no property, if the bank sues Michael, the bank will never collect. Michael is considered to be ________.

A) liquidated
B) judgment-proof
C) collateralized
D) fully monetarized

Question 6

Bonnie made the final payment to Big Bank on the 30-year mortgage loan she had on her home. Shortly thereafter Big Bank, to prove that the mortgage has been paid, filed a satisfaction of a mortgage with ________.

A) the secretary of state's office
B) the county recorder's office
C) the U.S. Department of Housing and Urban Development
D) the U.S. Bankruptcy Court

Question 7

A satisfaction of a mortgage is also called a(n) ________.

A) accommodation
B) reconveyance
C) consignment
D) foreclosure

Question 8

A debtor who does not make the required payments on a secured real estate transaction is considered to be ________.

A) liquidated
B) judgment-proof
C) in default
D) collateralized

Question 9

A default by a debtor in a secured real estate transaction may trigger a legal court action for ________.

A) compensation
B) novation
C) foreclosure
D) reconveyance

Question 10

If the mortgagee's or lienholder's foreclosure action in court is successful, the court will issue a judgment that orders ________.

A) that the mortgage or lien be renegotiated
B) the debtor to arrange new financing
C) that the underlying debt be forgiven
D) the real property to be sold at a judicial sale

Question 11

Any surplus funds following a judicial sale must be ________.

A) paid to the mortgagor or owner
B) split between the mortgagor and the mortgagee
C) paid to the court
D) impounded by the state treasurer's office

Question 12

Describe the right of redemption and when it can be exercised.

Question 13

A ________ 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.

A) subordinate
B) two-party secured
C) three-party secured
D) purchase money security interest

Question 14

In order to help his daughter Pamela secure a loan for her new business, Rich promised the bank that he would also be liable for the payment of Pamela's loan. Which of these is NOT a term that describes Rich's role in this transaction?

A) surety
B) accommodation party
C) co-signer
D) security

Question 15

In order to help his daughter Pamela secure a loan for her new business, Rich promised the bank that he would pay his daughter's loan if she defaults and does not pay the debt when it is due. Rich would be considered a(n) ________.

A) co-debtor
B) accommodation party
C) co-signer
D) guarantor

Question 16

The law that substantially amended federal bankruptcy law to make it much more difficult for debtors to escape unwanted debt through bankruptcy was the ________.

A) Bankruptcy Reform Act of 1978
B) Credit Card and Student Loan Bankruptcy Act of 2007
C) Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
D) Bankruptcy Act in 1878

Question 17

The federal government official who has responsibility for handling and supervising many of the administrative tasks associated with a bankruptcy case is the ________.

A) U.S. Trustee
B) Executive Director of the Administrator of the Federal Courts
C) Chief Judge of the U.S. Bankruptcy Court
D) Deputy Secretary of the Treasury for Bankruptcies

Question 18

One day, while playing a round of golf at Flosswood Country Club, bankers Tinkers, Evers and Chance realized that each of their banks had given unsecured loans to Max Duffer for $100,000 and that Max has defaulted on each of the loans. Which of these strategies might the three bankers take with regards to Max Duffer?

A) File a voluntary petition for bankruptcy with the bankruptcy court.
B) File an involuntary petition for bankruptcy with the bankruptcy court.
C) File a proof of interest with the bankruptcy court.
D) Petition the bankruptcy court for an automatic stay.

Question 19

In a Chapter 11 business reorganization form of bankruptcy, appointment by the bankruptcy court of a bankruptcy trustee ________.

A) is mandatory
B) is determined by the creditor committee
C) may be ordered upon a showing of fraud, dishonesty, incompetence, or gross mismanagement by the business' current management
D) is not permitted by the Bankruptcy Code

Question 20

Fast Eddie tells you that he thinks he has everything worked out. Eddie owes over $50,000 to debtor, and while he owns practically no assets, he does have a baseball card collection worth $100,000. Eddie tells you that he plans on giving his baseball card collection as a gift to his cousin on Sunday, and then file for bankruptcy on Monday. Eddie tells you, "That way those creditors will get practically nothin'! Ha!"Is Eddie right? Is there a provision of the Bankruptcy Code that might dash Eddie's plan?

Question 21

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

A) reorganization
B) liquidation
C) rehabilitation
D) consumer credit

Question 22

After running up a lot of credit card debt, Mort wants to make a "fresh start" by obtaining a Chapter 7 liquidation bankruptcy. Mort discovered that his family's income is below that of the median family income for a family the size of Mort's family in his state. As such, Mort qualifies to obtain a discharge of debts under Chapter 7 because ________.

A) he passed the mean income test
B) he passed the median income test
C) he passed the undue hardship test
D) he passed the mini/max test

Question 23

In her pursuit of a PhD in Business, Rhonda took out many student loans. Now that she has graduated and is working, Professor Rhonda is wondering if she can get relief from her student loan debt by filing for bankruptcy. Will Professor Rhonda be able to have her student loans discharged in bankruptcy?

A) Probably not, unless not having the loans discharged would cause an undue hardship to the Rhonda and her dependents.
B) Probably so, because she successfully graduated with a PhD in Business.
C) Probably not, unless she passes the median income test.
D) Very likely, if she files for a Chapter 13 bankruptcy.

Question 24

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

A) stuff-down authority
B) lay-down authority
C) beat-down authority
D) cram-down authority

Question 25

In a Chapter 11 bankruptcy proceeding, a debtor will submit to the bankruptcy court and to the creditors and other interested parties a proposal that sets forth suggested changes in its financial structure that it believes necessary in order to emerge from Chapter 11 bankruptcy as a viable business entity that will then be able to pay its debts. This proposal is called a(n) ________.

A) rehabilitation blueprint
B) plan of reorganization
C) outline of restructuring
D) master strategic protocol

Question 26

If all of the creditors in a Chapter 11 bankruptcy proceeding agree to a proposed plan of reorganization, the bankruptcy court will grant the ________ of the plan.

A) affirmation
B) confirmation
C) composition
D) annuit cœptis