Exam 2 612

Which of the following is an example of an unsecured debt?

A farmer sells fruits and vegetables to a grocery store that promises to for them within 30 days after receipt.

Which of the following corresponds to the basic priority rule established by the UCC?

A security interest has priority when it has been filed or perfected before the other interest on the same collateral.

Which of the following can be perfected only by filing a financing statement?

A security interest in accounts receivable and general intangibles.

A secured creditor is most likely going to perfect a security interest by possession or control with which of the following types of collateral?

A security interest in inventory.

Suppose a business borrows money from a bank to pay its operating expenses, and gives the bank a security interest in the business's equipment and inventory, and all after-acquired equipment and inventory. Which of the following does not take priority over the bank's security interest, even though it comes after the bank filed a financing statement for its security interest?

All of these take priority over the bank's previously created and perfected security interest.

Which type of bankruptcy proceeding can be initiated by a creditor filing an involuntary petition for bankruptcy?

Both Chapter 7 and Chapter 11.

If a secured creditor has perfected a security interest by filing a financing statement, how would the creditor extend the five-year period of perfection if the debt is not paid off by then?

By filing a continuation statement

How can a security interest in money be perfected?

By the creditor taking possession or control of the money.

Which type of bankruptcy proceeding would a company use to work out a plan for reorganizing the company's finances and avoiding going out of business?

Chapter 11

Which type of bankruptcy proceeding would an individual use to reduce and pay off personal consumer debt?

Chapter 13

Organize the boxes to reflect the sequence of events in a straight bankruptcy liquidation proceeding under Chapter 7 1. Start of period for payments and liens to insiders that may be "preferential" 2. Start of period for self-settled trusts that may be "fraudulent transfers" 3.Start of period for transfers that may be "fraudulent" 4.Start of period for payments and liens to non-insiders that may be "preferential" 5.Start of 180-day period for individual debtor to receive credit counseling

Correct Order 2, 3, 1, 5, 4

Organize the boxes to reflect the sequence of events in a straight bankruptcy liquidation proceeding under Chapter 7 1. "Automatic stay" begins 2 File bankruptcy petition 3.Debtor files necessary disclosures and certifications with the bankruptcy court 4.Appointment of Trustee 5.U.S. Trustee meeting with debtor and creditors

Correct Order 2,1,3,5,4

Organize the boxes to reflect the sequence of events in a straight bankruptcy liquidation proceeding under Chapter 7. 1. Deadline for filing reaffirmation agreements 2. Creditors file any objections to discharge 3. Discharge in bankruptcy 4.Distribution of bankruptcy estate 5.Deadline for creditors to file "proof of claims

Correct Order 5,4,2,1,3

Which is not a type of bankruptcy proceeding?

Cram down.

Which of the following is a dischargeable debt?

Credit card debt for older consumer purchases.

Which of the following is a nondischargeable debt?

Educational loans

Hairbrush Incorporated makes hairbrushes that it sells to Beauty Supply Incorporated, a wholesaler that distributes the brushes to Hair Salon Corporation, a hair styling salon where the employees use the brushes when cutting and styling customers' hair. Hairbrush also sell brushes to Drug Store LLC, a retail drug store that keeps the brushes in stock and sells them to customers. Drug Store sold one brush to Diana for her own personal use. What type of goods are the brushes with respect to Hair Salon Corporation?

Equipment

According to the concept of BLANK the mortgagor has the absolute right to discharge the mortgage when due and to have title to the mortgaged property restored free and clear of the mortgage debt.

Equity of redemption

BLANK is the process by which any rights of the mortgagor or the current property owner are cut off.

Foreclosure

Later extensions of credit stipulated by a security agreement are known as BLANK

Future advances

Geraldo agrees to be secondarily liable to guaranty a debt for his daughter Imelda if Imelda were to default on her payments. Geraldo is a(n) BLANK

Guarantor

What happens when an artisan or other lienholder gives up the possession of a good voluntarily?

He loses the lien

Which of the following statements about recording certain security interests with the appropriate government office is correct?

If it is not recorded, the security interest will not be effective against subsequent purchasers or creditors who have no notice of the security interest.

Suppose Capital Bank pursues strict foreclosure of Bill's mortgage on a rental property. Which of the following is true?

If the property is worth less than Bill owes, the bank has no right to recover the deficiency?

Gizmo Incorporated manufactures gadgets that are distributed to retailers for further sale. In Gizmo's hands, the gadgets are BLANK

Inventory

Which of the following claims would not be considered a priority claim under the Bankruptcy Code?

Medical bills

A hobby store borrowed money from First National Bank to purchase some expensive drones as inventory to sell. As part of its loan, the store signed a security agreement, which the bank filed with the appropriate government office. The store then sold several of the drones to customers in the ordinary course of business, but did not repay the loan to the bank. The bank wants to repossess the drones. Can the bank successfully assert its security interest as a basis for repossessing the drones from the customers?

No, because the customers are buyers in the ordinary course of business.

Which of the following deals with a secured party making sure she has a superior right to pledged collateral compared to other creditors?

Perfection

Filing a financing statement for goods:

Perfects the secured party's interest in the goods against most creditors who acquire a security interest in the goods after the filing.

Fred bought a hot tub on credit from Pools Inc. for his own personal use. To qualify for credit with Pools Inc., Fred has to sign a purchase money security interest agreement giving Pools Inc. the right to repossess the hot tub if Fred did not make the required monthly payments. What must Pools Inc. do in order to perfect its security interest in the hot tub?

Pools Inc. does not need to do anything to perfect its security interest.

When the seller of goods retains a security interest in goods until they are paid for, the security interest that is created and attached to the goods is known as a(n) BLANK

Purchase money security interest

Assume Will signed a guaranty for rent that Jack owes to Karen. Which of the following gives Will the ability to require Jack to pay the rent if Jack is able to do so and does not have a valid defense against paying the rent?

Right of exoneration

Assume Will, acting as surety for Jack, pays Jack's debts to Karen. Which of the following gives Will all of the rights that Karen had against Jacl?

Right of subrogation

Lights & Fans, a lighting supply store, borrowed money from Bank of Alabama to buy light fixtures as inventory for its store. Lights & Fans gave the bank a security interest in the fixtures and any proceeds from the sale of the fixtures. On September 10, Lights & Fans bought 50 chandeliers, using the money borrowed from Bank of Alabama. On September 20, Bank of Alabama filed a financing statement for the chandeliers. On September 30, Lights & Fans sold one of the chandeliers to Adelei for her personal use. Which of the following is correct?

The chandelier sold to Adelei will not be subject to Bank of Alabama's security interest.

On May 4, Tint, a computer wholesaler, purchased 30 computers. This comprised Tint's entire inventory and was financed under an agreement with Dome Bank, which gave the bank a security interest in all computers on the premises, all future acquired computers, and the proceeds of sales. On May 8, Dome filed a financing statement that adequately identified the collateral. On June 9, Tint sold one computer to Bean for personal use and four computers to Green Company for its business. Which of the following is true with regard to the above situation?

The computer sold to Bean will not be subject to Dome's security interest.

Which of the following is required for attachment of a security interest in goods?

The debtor must have rights in the goods

Which is an advantage of a bankruptcy proceeding under Chapter 11 of the Bankruptcy Code?

The debtor remains in business and debts are liquidated through implementation of approved reorganization plan.

The debtor's interest in which of the following types of property is not exempt from the bankruptcy estate under federal law?

The debtor's collection of art by unrelated artists.

A security interest in a debtor's inventory automatically covers which of the following?

The proceeds from the sale of the inventory.

A computer store wants to perfect a security interest on a laptop that it sells to a customer for the customer's personal use. If the sale was subject to a written security agreement, how would the computer store perfect its interest?

The security interest is automatically perfected by the attachment of the security interest to the laptop.

Which of the following is NOT required for the attachment of a security interest to a debtor's goods?

The security interest must be perfected.

Which is not something that the trustee can avoid or recover for the bankruptcy estate?

Transactions in the ordinary course of business.

Which of the following is NOT an example of a fraudulent transfer?

Transfers (such as retention bonuses) paid to insiders only where they are made in response to bona fide outside offers and the individual's services are essential to the survival of the business.

Which of the following is not a type of priority claim under the Bankruptcy Code?

Unsecured claims of up to $12,850 per individual for employee's wages earned more than 180 days before the petition was filed.

If there is a default on a secured debt, and a secured party sells a piece of collateral, which of the following statements is correct?

Until the collateral is actually disposed of by the creditor, the buyer can redeem it.

When are priority claims paid?

after secured creditors realize on their collateral but before other unsecured creditors

After the sale of collateral by the creditor, the proceeds BLANK

are first used to pay any expenses of repossessing, storing, and selling the collateral.

The purpose of the means test established by the 2005 revisions of the Bankruptcy Code is to:

ensure that individuals who will have income in the future that might be used to pay off at least a portion of their debts must pursue relief under Chapter 13.

A guarantor is BLANK liable for the debtor's obligation BLANK

secondarily, but rather makes a separate promise to be liable under the happening of a certain event.

If a person other than the debtor joins the debtor and becomes primarily liable with the debtor in a promise to pay an obligation, the other person would become a BLANK for the debt

surety