Question 1

Which of the following is true regarding a secured party's interest in proceeds?
A)A secured party automatically has an interest in proceeds for a limited amount of time.
B)A secured party has an interest in proceeds,but only if the secured party takes possession of the proceeds.
C)A secured party has an interest in proceeds,but only if a financing statement is filed on the proceeds.
D)A secured party has an interest in proceeds,but only if the secured party takes possession of the proceeds,or if the secured party files a financing statement on the proceeds.
E)The secured party may not acquire a security interest in proceeds unless a new agreement regarding the proceeds is reached with the debtor.

Accepted Answer

When a debtor sells collateral,he or she receives proceeds,something that is exchanged for collateral.The secured party automatically has an interest in proceeds for a limited amount of time.

Question 2

According to the Uniform Commercial Code,a financing statement should include ________.
A)the names and addresses of all the parties involved
B)the names and addresses of all the parties involved and a description of the collateral
C)the names and addresses of all the parties involved,a description of the collateral,and the signature of the debtor
D)the name of the financing bank and the name of the debtor,and a description of the collateral
E)the name of the financing bank,the signature of the debtor,a description of the collateral,and the details of the loan repayment schedule

Accepted Answer

According to Uniform Commercial Code Section 9-502,a financing statement should list the names and addresses of all the parties involved,a description of the collateral,and the signature of the debtor.

Question 3

According to the Uniform Commercial Code,what happens if a buyer of a consumer good subject to purchase-money security interest later sells the good?
A)The security interest immediately terminates.
B)The security interest passes to the new buyer.
C)Regardless of whether the new buyer is aware of the security interest,the security interest terminates if the sale to the buyer is made before the original secured party files a financial statement.
D)As long as the new buyer is not aware of the security interest,purchases the good for his or her personal use,and purchases the good before the secured party files a financial statement,the buyer obtains the good free of the security interest.
E)As long as the new buyer is not aware of the security interest,purchases the good for resale,and purchases the good before the secured party files a financial statement,the buyer obtains the good free of the security interest.

Accepted Answer

According to Uniform Commercial Code Section 9-320(b),as long as the new buyer is not aware of the security interest,purchases the good for his or her personal use,and purchases the good before the secured party files a financial statement; the buyer obtains the good free of the security interest.

Question 4

Failure to make payments on a loan is ________.
A)Chapter 7 bankruptcy
B)default
C)Chapter 11 bankruptcy
D)leverage
E)Chapter 7,Chapter 11,or Chapter 13 bankruptcy

Accepted Answer

When a debtor fails to make payments on a loan,the debtor defaults on the loan.

Question 5

In a dispute between two secured parties with unperfected security interests,which of the following is true?
A)The party who attached its interest first will prevail.
B)The party who attached its interest second will prevail.
C)The parties must divide the proceeds evenly between them.
D)The party who loaned the most money on the collateral has priority.
E)The party who loaned the least money on the collateral has priority.

Accepted Answer

If neither party has perfected its security interest,the party that attached its security interest first will have first claim to the collateral.

Question 6

The transfer of collateral to a secured party for the purpose of perfection is called a(n)________.
A)sole-benefit bailment
B)pledge
C)entrustment
D)allonge
E)allocation

Accepted Answer

Sometimes a debtor gives a creditor the collateral to hold until the loan is paid off.The transfer of collateral to the secured party for the purpose of perfection is called a pledge.

Question 7

What type of collateral must be perfected through possession?
A)Certificates of deposit
B)Stocks
C)Bonds
D)Certificates of deposit,stocks,and bonds
E)No types of collateral must be perfected through possession

Accepted Answer

Certain types of collateral must be perfected through possession.These types of collateral include instruments-writings that serve as evidence of rights to payment of money,such as certificates of deposit-and stocks and bonds.

Question 8

A secured party's interest in proceeds lasts for ________ after the debtor receives the proceeds.
A)three years
B)one year
C)180 days
D)30 days
E)10 days

Accepted Answer

Under the Uniform Commercial Code,the secured party's interest in proceeds lasts for only ten days after the debtor receives the proceeds.At that time,the secured party will typically need to file a new financing statement.The parties may also agree in the security agreement that there will be extended coverage of interest in the proceeds.

Question 9

Which of the following is an amendment to a financing statement stating that the debtor has no obligation to the secured party?
A)A declaration against interest
B)A termination statement
C)An accord and satisfaction
D)A settlement agreement
E)A novation

Accepted Answer

According to Uniform Commercial Code Section 9-513(a),a termination statement is an amendment to a financing statement which provides that the debtor has no obligation to the secured party.

Question 10

When a debtor sells collateral,he or she receives ________,something that is exchanged for collateral.
A)after-acquired property
B)consideration
C)proceeds
D)collateral
E)value

Accepted Answer

When a debtor sells collateral,he or she receives proceeds,something that is exchanged for collateral.

Question 11

What type of paper indicates both a monetary obligation and a security interest in specific goods?
A)Chattel paper
B)Service paper
C)Transactional paper
D)Commercial paper
E)Default paper

Accepted Answer

Chattel paper is a writing that indicates both a monetary obligation and a security interest in specific goods.

Question 12

What is the national standard for perfecting a security interest in an automobile or a boat?
A)Perfection by pledge or perfection by filing
B)Perfection by filing or perfection by possession
C)Automatic perfection or perfection by possession
D)Automatic perfection or perfection by filing
E)No national standard exists for perfecting a security interest in an automobile or a boat.

Accepted Answer

No national standard exists for perfecting a security interest in an automobile or a boat.Each state has created special laws that pertain to perfection of security interests in motor vehicles.

Question 13

A security interest in a trademark,copyright,or patent is perfected ________.
A)automatically
B)by filing
C)by possession
D)by filing or by possession,but not automatically
E)automatically,by filing,or by possession

Accepted Answer

"General intangibles" include trademarks,copyrights,and patents.A security interest in a trademark,copyright,or patent is perfected by filing.

Question 14

Which of the following can be considered after-acquired property?
A)Inventory
B)Livestock
C)Equipment
D)Inventory,livestock,or equipment
E)Inventory and equipment,but not livestock

Accepted Answer

After-acquired property is acquired by the debtor after the security agreement is made.After-acquired property can be inventory,livestock,equipment,or almost any other kind of property.

Question 15

A(n)________ good is a good used or bought for use primarily for personal,family,or household purposes.
A)retail
B)consumer
C)commercial
D)intangible
E)unsecured

Accepted Answer

According to Uniform Commercial Code Section 9-102(23),a consumer good is used or bought for use primarily for personal,family,or household purposes.

Question 16

A security interest in collateral that has been perfected in one state:
A)Will generally transfer to another state for a period of four months from the date that the property is brought into the state.
B)Will generally transfer to another state for a period of six months from the date that the property is brought into the state
C)Will generally transfer to another state for a period of one year from the date that the property is brought into the state
D)Will generally transfer to another state for a period of five years from the date that the property is brought into the state
E)Will not transfer to another state.

Accepted Answer

According to the Uniform Commercial Code,a security interest in collateral that has been perfected in one state will generally transfer to another state for a period of four months from the date that the property is brought into the state.The secured party may re-perfect the interest in the new state.However,if the interest is not re-perfected,the secured party may lose its protection.

Question 17

What kind of property is acquired by the debtor after the security agreement is made?
A)Post-dated property
B)After-acquired property
C)Proceeds
D)Ex post facto property
E)Incidental property

Accepted Answer

After-acquired property is acquired by the debtor after the security agreement is made.

Question 18

Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts satisfied through the same collateral?
A)Perfection
B)Procedural due process
C)Novation
D)Strategic credit management
E)Substantive due process

Accepted Answer

When a party perfects its interest in collateral,it is legally protecting its claim to the collateral.Perfection is a series of legal steps a secured party takes to protect its right in the collateral from other creditors who wish to have their debts satisfied through the same collateral.

Question 19

Once a financing statement has been filed with the correct agency,how long is the statement valid without renewal?
A)180 days
B)1 year
C)3 years
D)5 years
E)7 years

Accepted Answer

According to Uniform Commercial Code Section 9-515,once a financing statement is filed with the correct agency,the statement is valid for five years without renewal.After five years,the statement expires,and the security interest is not protected.However,within six months of the expiration date of the financing statement,the secured party can file a continuation statement,which is valid for another five years.

Question 20

Which party routinely buys goods in good faith from a person who routinely sells such goods?
A)A commercial purchaser
B)A non-commercial purchaser
C)A course of dealings purchaser
D)A buyer in the ordinary course of business
E)A holder of goods in due course

Accepted Answer

A buyer in the ordinary course of business is a person who routinely buys goods in good faith from a person who routinely sells these goods.

Quiz 19: Secured Transactions and Bankruptcy

Which of the following is true regarding a secured party's interest in proceeds?

According to the Uniform Commercial Code,a financing statement should include ________.

According to the Uniform Commercial Code,what happens if a buyer of a consumer good subject to purchase-money security interest later sells the good?

Failure to make payments on a loan is ________.

In a dispute between two secured parties with unperfected security interests,which of the following is true?

The transfer of collateral to a secured party for the purpose of perfection is called a(n) ________.

What type of collateral must be perfected through possession?

A secured party's interest in proceeds lasts for ________ after the debtor receives the proceeds.

Which of the following is an amendment to a financing statement stating that the debtor has no obligation to the secured party?

When a debtor sells collateral,he or she receives ________,something that is exchanged for collateral.

What type of paper indicates both a monetary obligation and a security interest in specific goods?

What is the national standard for perfecting a security interest in an automobile or a boat?

A security interest in a trademark,copyright,or patent is perfected ________.

Which of the following can be considered after-acquired property?

A(n) ________ good is a good used or bought for use primarily for personal,family,or household purposes.

A security interest in collateral that has been perfected in one state:

What kind of property is acquired by the debtor after the security agreement is made?

Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts satisfied through the same collateral?

Once a financing statement has been filed with the correct agency,how long is the statement valid without renewal?

Which party routinely buys goods in good faith from a person who routinely sells such goods?