Question 1

Sam is the secured party in a transaction with Lilly, who is the debtor. Sam files a financing statement with the appropriate state official. The financing statement must contain​

Accepted Answer

A financing statement must contain the debtor's name, which is often represented by the debtor's signature, to properly identify the debtor in the transaction.

Question 2

Resource Investment Company and MegaBank are secured parties with security interests in property owned by LNG Gas Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in​

Accepted Answer

The general rule under the Uniform Commercial Code (UCC) is that the first to file or perfect a security interest has priority over subsequently filed or perfected security interests in the same collateral. While there are limited exceptions to this rule, it applies in most circumstances. The priority of security interests is determined by the order in which they are filed or perfected, and not by whether the creditor signed and dated the security agreement or whether the state has adopted Article 9 of the UCC. Therefore, options B, C, and D are incorrect.

Question 3

The payment of Linda's debt to Pat is guaranteed by Linda's personal property. Pat is most likely to perfect her interest by​

Accepted Answer

Filing a financing statement with the appropriate authority is the most common way to perfect a security interest in personal property. It establishes priority over other creditors and notifies third parties of the interest. Insurance, calculating debt, and correcting grammar do not relate to perfecting a security interest.

Question 4

Angie borrows $20,000 from Credit Line Company using a stand of timber as collateral. To perfect its security interest, Credit Line must file its financing statement with​

Accepted Answer

The answer of Angie borrows $20,000 from Credit Line Company...

Question 5

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory​

Accepted Answer

An after-acquired property clause would allow EZ Loans to have a security interest in any new inventory obtained by Glade Electronics Corporation after the security agreement was signed. The clause would have to be included in the original security agreement for this to apply.

Question 6

Metro Motors files a financing statement giving notice to the public that it has a secured interest in collateral belonging to Nate's Limousine Service, which is the debtor named in the statement. A uniform financing statement used in all states is​

Accepted Answer

The UCC Financing Statement is a uniform form used in all states to provide public notice of a creditor's security interest in collateral owned by a debtor. It is the standard form for filing a financing statement under Article 9 of the Uniform Commercial Code (UCC). The other choices, UCC Collateral Form and Form UCC-2, do not exist as standardized forms.

Question 7

Fiscal Credit Corporation asks Global Industries, Inc., to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is​

Accepted Answer

A security agreement that provides for coverage of the proceeds from the sale of after-acquired property is known as a floating lien. This type of security agreement allows the lender to secure future advances made to the borrower. It is commonly used in business financing and is generally enforceable under state laws as long as certain requirements are met.

Question 8

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of​

Accepted Answer

The initial effective term of a financing statement is five years, as per the Uniform Commercial Code (UCC).

Question 9

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include​

Accepted Answer

The legally sufficient financing statement needs to include a description of the collateral, Brass & Woodwind's name, and Clifton's name. However, it does not need to include a statement of the reason for allowing Clifton to take the goods.

Question 10

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have​

Accepted Answer

When certain requirements are met, Olaf will have an enforceable security interest in Phil's property. A security interest is a creditor's interest in a debtor's property to secure repayment of a debt. This means that if Phil defaults on the debt, Olaf would have the right to repossess the property to pay for the debt owed to him.

Question 11

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are​

Accepted Answer

The Mazda Miatas are considered after-acquired property because they were not owned by Ken's Auto Sales at the time the security agreement with Lenders Finance Corporation was entered into.

Question 12

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for​

Accepted Answer

A continuation statement extends the effectiveness of a financing statement for an additional five years from the date the financing statement would have expired.

Question 13

Kyla holds a security interest in inventory owned by Luc. Kyla protects her claim to the inventory in the event of Luc's default by​

Accepted Answer

Perfection is the process of taking certain steps to ensure that a security interest is recognized as valid and enforceable against third parties. By perfecting her security interest in Luc's inventory, Kyla protects her claim to the inventory in the event of default.

Question 14

Fund Credit Corporation asks Gro-Sales Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is​

Accepted Answer

A security agreement that covers after-acquired property is known as a floating lien. This type of security interest allows the lender to obtain a security interest in property acquired by the borrower after the security agreement is executed. It is not in violation of secured transactions law as long as it meets the requirements set forth by the Uniform Commercial Code (UCC).

Question 15

Fiona borrows $1,000 from Garden State Bank, using her recreational vehicle (RV), which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with​

Accepted Answer

When a security interest is taken in personal property, such as an RV, the lender must perfect their security interest by filing a financing statement with the secretary of state. This puts other potential creditors on notice of the lender's claim to the collateral in the event of default. Filing with the county clerk or city treasurer is not sufficient for perfecting a security interest in personal property. Filing with the seller, Hugo's RV, is also not necessary as they are not involved in the lender/borrower relationship.

Question 16

Jones lives in Illinois, but works in Indiana. Jones borrows $1,000 from Heartland Bank, using her car as collateral. To perfect its security interest, the bank must file its financing statement in at least​

Accepted Answer

The financing statement should be filed in the state where the debtor is located, which is Illinois, as Jones lives there.

Question 17

Lenders Bank files a financing statement regarding a transaction with Metro Construction Company. To be valid, the financing statement must contain all of the following except​

Accepted Answer

A statement of the purpose for the transaction is not required for a valid financing statement. However, a description of the collateral, Lender's name, and Metro's name are necessary.

Question 18

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

Accepted Answer

The description of Chick's subject property by serial number is sufficient if it accurately describes the parties' agreement. A specific description of the autos' other identifying characteristics is not necessary as long as the serial numbers are accurately described in the agreement.

Question 19

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by​

Accepted Answer

Filing a financing statement with the appropriate authority is the most common way to perfect the interest of a secured party in personal property. This gives notice to other potential creditors that Kirsten has a security interest in John's property and may take priority over their claims. Attaching a label or calculating the precise amount of debt alone does not perfect the interest. Correcting grammatical errors may be important for clarity, but it does not impact the perfection of the security interest.

Question 20

The payment of Hu's debt to Intrastate Bank is guaranteed by Hu's personal property. To give notice of its interest in Hu's property to other creditors, the bank is most likely to​

Accepted Answer

The bank is most likely to file a financing statement with the appropriate authority, such as the Secretary of State's office, to provide notice of its interest in Hu's personal property. This is a common practice in secured transactions and provides protection for the bank's collateral rights. Attaching a bright label or publishing a collection notice in local newspapers would not be an effective way to provide this notice, and e-mailing other potential creditors may not be a reliable or legally recognized communication method.

Quiz 30: Secured Transactions

Sam is the secured party in a transaction with Lilly, who is the debtor. Sam files a financing statement with the appropriate state official. The financing statement must contain

Resource Investment Company and MegaBank are secured parties with security interests in property owned by LNG Gas Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in

The payment of Linda's debt to Pat is guaranteed by Linda's personal property. Pat is most likely to perfect her interest by

Angie borrows $20,000 from Credit Line Company using a stand of timber as collateral. To perfect its security interest, Credit Line must file its financing statement with

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory

Metro Motors files a financing statement giving notice to the public that it has a secured interest in collateral belonging to Nate's Limousine Service, which is the debtor named in the statement. A uniform financing statement used in all states is

Fiscal Credit Corporation asks Global Industries, Inc., to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for

Kyla holds a security interest in inventory owned by Luc. Kyla protects her claim to the inventory in the event of Luc's default by

Fund Credit Corporation asks Gro-Sales Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is

Fiona borrows $1,000 from Garden State Bank, using her recreational vehicle (RV) , which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with

Jones lives in Illinois, but works in Indiana. Jones borrows $1,000 from Heartland Bank, using her car as collateral. To perfect its security interest, the bank must file its financing statement in at least

Lenders Bank files a financing statement regarding a transaction with Metro Construction Company. To be valid, the financing statement must contain all of the following except

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by

The payment of Hu's debt to Intrastate Bank is guaranteed by Hu's personal property. To give notice of its interest in Hu's property to other creditors, the bank is most likely to