Question 1

A surety is secondarily liable for paying the principal debtor's debt when it is due.

Accepted Answer

The answer of A surety is secondarily liable for paying...

Question 2

In a guaranty arrangement,the guarantor is primarily liable on another person's debt.

Accepted Answer

In a guaranty arrangement, the guarantor is secondarily liable, meaning they are responsible for the debt only if the primary debtor fails to pay.

Question 3

Common garnishees include employers who possess wages due a debtor.

Accepted Answer

This statement is true. Garnishment is a legal process by which a creditor can collect a debt by seizing a portion of a debtor's assets or income. Common garnishees include employers who possess wages that are due to the debtor.

Question 4

Embellishment is a post-judgment order that permits the seizure of a debtor's property that is in the possession of third parties.

Accepted Answer

The correct term for a post-judgment order that permits the seizure of a debtor's property in the possession of third parties is "garnishment," not "embellishment."

Question 5

Frank has agreed to be a surety for his daughter's loan.If she defaults,the lender must attempt to collect the debt from the daughter first,and may only sue Frank if the daughter refuses to pay.

Accepted Answer

The answer of Frank has agreed to be a surety...

Question 6

State law limitations on garnishment control are often less stringent than federal law.

Accepted Answer

State law limitations on garnishment control can vary from state to state, and in some cases may be more stringent than federal law. However, there are some states where state law limitations are less stringent than federal law. It is important to consult with an attorney or legal expert in the specific state in question to determine the applicable laws and limitations on garnishment.

Question 7

Common garnishees include banks in possession of funds belonging to a debtor.

Accepted Answer

This is true as banks may be garnished if they are holding funds belonging to a debtor. Other common garnishees include employers who owe wages to a debtor and third-party contractors who owe money to a debtor.

Question 8

Generally,if the sale of collateral is insufficient to repay a secured loan plus interest,the creditor may bring a lawsuit against the debtor to recover a ________ judgment for the difference.

Accepted Answer

A deficiency judgment is a court order requiring the borrower to pay the remaining balance on a loan after the collateral has been sold, and if the sale of collateral is insufficient to repay the secured loan plus interest. This allows the creditor to recover the shortfall amount from the borrower. Therefore, option B is the correct answer. The other options listed are not applicable in this context.

Question 9

Title III of the Consumer Credit Protection Act allows debtors who are subject to a writ of garnishment to retain a total of (1)75 percent of their weekly disposable earnings and (2)an amount equal to thirty hours of work paid at federal minimum wage.

Accepted Answer

The answer of Title III of the Consumer Credit Protection...

Question 10

Attachment is a post-judgment court order that permits the seizure of a debtor's property that is in the debtor's possession.

Accepted Answer

Attachment is a pre-judgment court order that allows the seizure of a debtor's property to secure a potential future judgment.

Question 11

A writ of execution is a court order directing the sheriff or other government official to seize the debtor's property in the debtor's possession and authorizing a judicial sale of that property.

Accepted Answer

A writ of execution is indeed a court order that allows the seizure of a debtor's property and authorizes its sale to satisfy a debt or judgment.

Question 12

To obtain a writ of attachment,a creditor must follow the procedures of state law,give the debtor notice,and post a bond with the court.

Accepted Answer

This statement is true. To obtain a writ of attachment, a creditor must follow the procedures outlined in state law, which typically involve providing notice to the debtor and posting a bond with the court.

Question 13

Sometimes,a creditor refuses to extend credit to a debtor unless a third party agrees to become liable on the debt.The third person's credit becomes the security for the credit extended to the debtor.This relationship may be either a surety arrangement or a guaranty arrangement.

Accepted Answer

This statement is true. A creditor may require a third party to become liable on the debt of a debtor, either through a surety arrangement or a guaranty arrangement. This provides the creditor with additional security in case the debtor defaults on the credit extended.

Question 14

In a strict surety arrangement,the surety assumes primary liability on another person's debt.

Accepted Answer

In a strict surety arrangement, the surety assumes primary liability on another person's debt, making them directly responsible for the debt if the primary debtor cannot pay. This is different from a secondary surety arrangement, where the surety is only liable if the primary debtor defaults and cannot pay the debt.

Question 15

A person who acts as a surety is commonly called an accommodation party or co-signer.

Accepted Answer

This statement is true. A person who acts as a surety is often referred to as an accommodation party or co-signer.

Question 16

Buyers in the ordinary course of business who purchases goods from a merchant take the goods free from any perfected or unperfected security interest in the merchant's inventory,even if the buyer knows of the existence of the security interest.

Accepted Answer

This is known as the "buyer in the ordinary course of business" exception to security interests in inventory under the Uniform Commercial Code (UCC). As long as the buyer purchased the goods in the normal course of the merchant's business, they take the goods free and clear of any security interest, regardless of whether or not they were aware of the security interest.

Question 17

In order for a surety to be liable,the principal does not have to be in default on the debt,and the creditor does not have to have exhausted all its remedies against the principal debtor before seeking payment from the surety.

Accepted Answer

The answer of In order for a surety to be...

Question 18

Execution is a pre-judgment court order that permits the seizure of a debtor's property that is in the debtor's possession while a lawsuit against the debtor is pending.

Accepted Answer

Execution is a post-judgment process that allows for the enforcement of a court's judgment, typically involving the seizure of a debtor's property after a judgment has been made against them.

Question 19

The terms "accommodation party" and "cosigner" are synonymous.

Accepted Answer

The answer of The terms "accommodation party" and "cosigner" are...

Question 20

If the collateral is something other than inventory,a perfected purchase money security interest prevails over a perfected nonpurchase money security interest in after-acquired property if it is perfected when the debtor receives possession of the collateral,or within twenty days after the debtor receives possession of the collateral.

Accepted Answer

This statement is true according to the priority rules established in Article 9 of the Uniform Commercial Code. A purchase money security interest (PMSI) has priority over a nonpurchase money security interest (non-PMSI) in after-acquired property if the PMSI is properly perfected at the time the debtor takes possession of the collateral, or within 20 days thereafter. This rule applies to security interests in non-inventory collateral, such as equipment or vehicles.

Quiz 23: Credit and Secured Transactions