Question 1

A(n) ________ is an order that permits the creditor to recover property beyond foreclosed property.

Accepted Answer

A deficiency judgment allows the creditor to recover the remaining amount owed by the debtor if the sale of the foreclosed property does not cover the full debt.

Question 2

If Paul proceeds with attempting to obtain and enforce a lien, what is the most likely result?

Accepted Answer

The answer of If Paul proceeds with attempting to obtain...

Question 3

A(n) ________ lien is a claim to property in which the lienholder has the right to be in possession of the property until the debt is paid.

Accepted Answer

A possessory lien grants the lienholder the right to retain possession of the property until the debt associated with it is paid. This is distinct from other types of liens where possession might not be a factor.

Question 4

[Bad Hair Day] Tara started a new hair salon and leased space for the salon from Marisa. Unfortunately, Tara's styling caused some problems for customers. One customer's hair turned green from Tara's bleaching process, and Tara burned another customer with a curling iron. Not surprisingly, Tara had little business and was unable to pay her lease payments as they came due. Marisa filed a lawsuit against Tara and obtained a judgment against Tara for $7,000 in past due rent. Marisa asked for a court-ordered judgment permitting the sheriff to seize and sell Tara's equipment, including her hair-dryers, pedicure chair, nail polish, and other items. The judge refused her request. Marisa did, however, obtain an order allowing her to seize $3,000 held in Tara's bank account to partially satisfy the debt. Marisa also discovered that Tara had, for her personal use, a wide-screen television set worth approximately $1,000 which was being held by Franklin, a television repairer, for the costs of repair. Marisa asked him to turn over the television because her lien had priority, but Franklin refused.
-Marisa was allowed to seize money from Tara's bank account with what type of order?

Accepted Answer

Garnishment is the correct answer because it is a legal process that allows a creditor to obtain a court order to seize money from a debtor's bank account to satisfy a debt.

Question 5

If a surety or guarantor pays the debtor's obligation to the creditor, the surety or guarantor has a right to ________, which means that the surety or guarantor is entitled to all the rights that the creditor had against the debtor.

Accepted Answer

Subrogation is the legal principle that allows a surety or guarantor who has paid the debtor's obligation to step into the shoes of the creditor and exercise all the rights the creditor had against the debtor.

Question 6

[Defective Windows] Cecelia hired a contractor, Paul, to put new windows in her home that she purchased herself from Good Windows. Unfortunately, Paul made a mess of the windows. While the windows were initially in good shape, Paul cracked some, scratched others, and did not get the windows properly fitted into their frames. Cecelia received a bill for the windows from Good Windows, but she refused to pay. Cecelia was told that Good Windows would file a lien, but she believed that there was no basis upon which a lien would be granted. Paul, who refused responsibility for any problems, also filed a lien after Cecelia refused to pay him.
-Which of the following is true regarding the type of lien, if any, that Good Windows is entitled to obtain prior to going to court, assuming the court follows the reasoning of Bates County Redi-Mix Inc. v. Windler?

Accepted Answer

Good Windows is entitled to a mechanic's lien because they provided materials for the improvement of Cecelia's home.

Question 7

Which of the following is a transfer or assignment by a debtor of title to property to a trustee or an assignee who sells the property with the proceeds of the sale going to pay creditors on a pro rata basis?

Accepted Answer

An assignment for the benefit of creditors is a legal process in which a debtor transfers title to property to a trustee or assignee, who then sells the property and uses the proceeds to pay creditors on a pro rata basis. This is a form of voluntary liquidation outside of bankruptcy proceedings.

Question 8

Which of the following is true if a debtor engaged in fraud in order to convince a surety or guarantor to enter into a contract with a third party?

Accepted Answer

If a debtor engaged in fraud to convince a surety or guarantor to enter into a contract with a third party, both the guarantor and the surety are likely to be released from liability due to the fraudulent inducement.

Question 9

[Defective Windows] Cecelia hired a contractor, Paul, to put new windows in her home that she purchased herself from Good Windows. Unfortunately, Paul made a mess of the windows. While the windows were initially in good shape, Paul cracked some, scratched others, and did not get the windows properly fitted into their frames. Cecelia received a bill for the windows from Good Windows, but she refused to pay. Cecelia was told that Good Windows would file a lien, but she believed that there was no basis upon which a lien would be granted. Paul, who refused responsibility for any problems, also filed a lien after Cecelia refused to pay him.
-What is the most likely result if Good Windows proceeds with attempting to obtain a lien, assuming the court follows the reasoning of Bates County Redi-Mix Inc. v. Windler discussed in the text?

Accepted Answer

Good Windows is likely to prevail in obtaining a lien because their responsibility was limited to providing the windows, which they did. The improper installation, which was the fault of the contractor Paul, does not negate Cecelia's obligation to pay for the windows themselves.

Question 10

[Bad Hair Day] Tara started a new hair salon and leased space for the salon from Marisa. Unfortunately, Tara's styling caused some problems for customers. One customer's hair turned green from Tara's bleaching process, and Tara burned another customer with a curling iron. Not surprisingly, Tara had little business and was unable to pay her lease payments as they came due. Marisa filed a lawsuit against Tara and obtained a judgment against Tara for $7,000 in past due rent. Marisa asked for a court-ordered judgment permitting the sheriff to seize and sell Tara's equipment, including her hair-dryers, pedicure chair, nail polish, and other items. The judge refused her request. Marisa did, however, obtain an order allowing her to seize $3,000 held in Tara's bank account to partially satisfy the debt. Marisa also discovered that Tara had, for her personal use, a wide-screen television set worth approximately $1,000 which was being held by Franklin, a television repairer, for the costs of repair. Marisa asked him to turn over the television because her lien had priority, but Franklin refused.
-What is the term for what Marisa requested when she requested that the judge have law enforcement officers seize and sell Tara's equipment?

Accepted Answer

Marisa requested a writ of execution, which is a court order that allows law enforcement officers to seize and sell a debtor's property to satisfy a judgment.

Question 11

[Defective Windows] Cecelia hired a contractor, Paul, to put new windows in her home that she purchased herself from Good Windows. Unfortunately, Paul made a mess of the windows. While the windows were initially in good shape, Paul cracked some, scratched others, and did not get the windows properly fitted into their frames. Cecelia received a bill for the windows from Good Windows, but she refused to pay. Cecelia was told that Good Windows would file a lien, but she believed that there was no basis upon which a lien would be granted. Paul, who refused responsibility for any problems, also filed a lien after Cecelia refused to pay him.
-What type of lien would Paul likely seek?

Accepted Answer

Paul would likely seek a mechanic's lien because this type of lien is used by contractors, subcontractors, or suppliers who have performed work or supplied materials to improve a property and have not been paid. In this scenario, Paul performed work on Cecelia's property by installing windows and has not been paid for his services.

Question 12

Which of the following may occur when a third party agrees to be liable for a debtor's loan either primarily or secondarily?

Accepted Answer

When a third party agrees to be liable for a debtor's loan, either primarily or secondarily, it may result in a suretyship or a guaranty. Both are forms of agreements where a third party takes on the obligation to pay the debt if the primary debtor fails to do so. A certified agreement is not a term commonly used in this context.

Question 13

[Bad Hair Day] Tara started a new hair salon and leased space for the salon from Marisa. Unfortunately, Tara's styling caused some problems for customers. One customer's hair turned green from Tara's bleaching process, and Tara burned another customer with a curling iron. Not surprisingly, Tara had little business and was unable to pay her lease payments as they came due. Marisa filed a lawsuit against Tara and obtained a judgment against Tara for $7,000 in past due rent. Marisa asked for a court-ordered judgment permitting the sheriff to seize and sell Tara's equipment, including her hair-dryers, pedicure chair, nail polish, and other items. The judge refused her request. Marisa did, however, obtain an order allowing her to seize $3,000 held in Tara's bank account to partially satisfy the debt. Marisa also discovered that Tara had, for her personal use, a wide-screen television set worth approximately $1,000 which was being held by Franklin, a television repairer, for the costs of repair. Marisa asked him to turn over the television because her lien had priority, but Franklin refused.
-What is the most likely result of the dispute between Franklin and Marisa regarding the television set, assuming no exemption applies?

Accepted Answer

Franklin will win the dispute because he has an artisan's lien for the repair costs of the television, which typically grants him a super-priority over other claims such as Marisa's judicial lien. This means Franklin can recover the repair costs from the sale of the television before any funds are allocated to Marisa's judgment.

Question 14

________ liens are either imposed by a court or can be created by a sales contract and are issued in the interest of fairness.

Accepted Answer

Equitable liens are imposed by a court or can be created by a sales contract in the interest of fairness, reflecting the equitable interests of parties involved.

Question 15

Which of the following defenses might a guarantor raise if the guarantor's oral promise to pay a debt is not in writing?

Accepted Answer

The Statute of Frauds requires certain contracts, including guaranty agreements, to be in writing to be enforceable. An oral promise by a guarantor to pay a debt typically falls under this statute, allowing the guarantor to raise this defense.

Question 16

Ridland has had severe problems staying out of debt. He has several creditors who wish to file a garnishment against his wages. Can all of the creditor's file the garnishment at once?

Accepted Answer

Garnishment laws typically allow only one garnishment to proceed at a time, and priority is often given to the first creditor who files for garnishment. This prevents multiple garnishments from overwhelming the debtor's wages simultaneously.

Question 17

[Bad Hair Day] Tara started a new hair salon and leased space for the salon from Marisa. Unfortunately, Tara's styling caused some problems for customers. One customer's hair turned green from Tara's bleaching process, and Tara burned another customer with a curling iron. Not surprisingly, Tara had little business and was unable to pay her lease payments as they came due. Marisa filed a lawsuit against Tara and obtained a judgment against Tara for $7,000 in past due rent. Marisa asked for a court-ordered judgment permitting the sheriff to seize and sell Tara's equipment, including her hair-dryers, pedicure chair, nail polish, and other items. The judge refused her request. Marisa did, however, obtain an order allowing her to seize $3,000 held in Tara's bank account to partially satisfy the debt. Marisa also discovered that Tara had, for her personal use, a wide-screen television set worth approximately $1,000 which was being held by Franklin, a television repairer, for the costs of repair. Marisa asked him to turn over the television because her lien had priority, but Franklin refused.
-Which of the following is the most likely reason for the judge's refusal to allow the sheriff to seize Tara's equipment?

Accepted Answer

The most likely reason for the judge's refusal to allow the sheriff to seize Tara's equipment is that it was exempt as tools and instruments needed to carry on a trade. This exemption is common in many jurisdictions to allow individuals to maintain their means of livelihood even in the face of debt collection.

Question 18

A ________ is a contract between a creditor and a third party who agrees to pay another person's debt and is primarily liable for the debt whereas in a ________, a third party, must pay a debt only after the debtor has defaulted.

Accepted Answer

In a suretyship, the third party (the surety) agrees to be primarily liable for the debt of another, meaning they agree to pay the debt if the primary debtor does not, without requiring the creditor to exhaust remedies against the debtor first. In a guaranty, the guarantor agrees to pay the debt only after the primary debtor has defaulted, making the guarantor's obligation secondary to the debtor's.

Question 19

A(n) ________ is a claim to property by implication of law rather than statute.

Accepted Answer

A common law lien arises from the common law (case law or judicial precedents) rather than from a specific statute. It is a right to retain possession of property belonging to another person until a debt owed by that person is paid.

Question 20

A consummate lien is the lien of the judgment creditor that arises when

Accepted Answer

A consummate lien arises when a judgment becomes final, such as when a motion for a new trial is denied, solidifying the creditor's claim.

Quiz 31: Other Creditors Remedies and Suretyship