Unit 2 Exam Law 332

Under Chapter 13, a repayment plan must provide for

the same treatment of each claim within a particular class of claim.

An individual who borrows funds from a financial institution to purchase real property by taking out a mortgage is a mortgagee.

False

Bankruptcy relief is provided under state, not federal, law.

False

Because a mortgage involves a transfer of real property, it need not be in writing.

False

Because a writ of attachment is a prejudgment remedy, a debtor does not need to be given notice and an opportunity to be heard before the property is seized.

False

Businesses must be technically insolvent to file for bankruptcy relief.

False

Equitable redemption allows a lender to gain title and regain possession of a property.

False

In Missouri, all financing statements are filed with the recorder of deeds in the county where collateral is located.

False

Most creditors require a borrower to purchase mortgage insurance if the borrower makes a down payment of at least 20 percent of the purchase price.

False

Most liens have little practical use, because liens generally do not take priority over other claims to the same property.

False

Once a bankruptcy petition is properly filed, creditors can commence or continue most legal actions against the debtor to recover claims.

False

Providing only a debtor's trade name in a financing statement is sufficient for perfection even if the trade name is not the legal name of the business.

False

The UCC's classification or definition of collateral does not affect where or how to perfect a security interest.

False

The instrument normally filed to give public notice to third parties of a secured party's security interest is collateral.

False

Under Chapter 13, all debts are dischargeable.

False

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11, but not Chapter 13, bankruptcies.

False

Kiosk Jewelers borrows from Lender Inc. and Mortgage Company, using the same collateral. Only Mortgage Company has a perfected security interest. Kiosk defaults on both loans. The party with first rights to the collateral is

Mortgage Company.

Ranch West owes Silo & Barn Inc. $5,000 on their contract, but refuses to pay. To collect, Silo files a mechanic's lien, under which security for the debt is represented by

Ranch's real estate.

A lender can require a borrower to maintain the property in such a way that the lender's investment is protected.

True

A mortgage gives a creditor a lien on a debtor's real property as security for payment of a debt.

True

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

True

Attachment ensures that a security interest between a debtor and a secured party is effective.

True

For most collateral, possession by a secured party is impractical because it denies the debtor the right to use or derive income from the property to pay the debt.

True

Improper filing of a financing statement can render a security interest unperfected.

True

In Missouri, mechanic's liens are recorded in the circuit court clerk's office of the county where the job is physically located.

True

In a Chapter 13 proceeding, the debtor retains possession of his or her assets.

True

In a Chapter 7 proceeding, the bankruptcy trustee collects the debtor's estate and reduces it to cash, preserving the interests of the debtor and creditors.

True

The borrower is typically required to pay all property taxes, assessments, and other claims against the property.

True

United Contractors Inc. holds a lien on Vista Estate's real property. This property can be sold to satisfy the debt if, before the sale, notice is given to

Vista Estate.

Yang files a petition in bankruptcy under Chapter 7. Zhen takes control over her property and reduces it to money for distribution. Zhen is

a bankruptcy trustee.

In addition to financial statements, each voluntary petition in bankruptcy must include

a certificate proving the receipt of credit counseling.

Construction Inc. wants to agree with its creditors on a plan under which it pays a portion of its debt and is discharged of the rest. To accomplish this goal, the corporation should file a petition in bankruptcy under Chapter 11 for relief through

a reorganization.

All bankruptcy proceedings are held in

federal bankruptcy courts.

The payment of Commerce Inc.'s debt to Debt Service LLC is guaranteed by the firm's property. Debt Service is most likely to perfect its interest by

filing a financing statement with the appropriate authority.

At the time of the filing of the petition and the time of the filing of the plan, Chapter 13 imposes on the debtor the requirement of

good faith.

To buy furniture, Gina, a consumer, signs a purchase agreement with Home Store, the seller, to pay $100 down and $50 per month until the price is paid. Home Store takes a security interest in the furniture. Because it was created as part of purchase agreement with a consumer, the security interest

is automatically perfected.

An involuntary bankruptcy occurs when a debtor

is forced into bankruptcy proceedings by his or her creditors.

Bauxite Mine borrows $60,000 from Commerce Bank, with the loan secured by the borrower's property. The debtor defaults on the loan. Commerce relinquishes its security interest to seek a judicial remedy. To obtain funds to satisfy the debt by a seizure and sale of the borrower's nonexempt property, after a writ is issued, the creditor can use the process of

levy.

Chapter 7 of the Bankruptcy Code provides for

liquidation proceedings.

Ready Credit Inc. holds a security interest in inventory owned by Soy Products Inc. Ready Credit can protect its claim to the inventory in the event of Soy Products' default by

perfection.

A security interest cannot become perfected without the filing of a security agreement.

False

Brie, Cam, and Dei are co-sureties of Edie's debt to Finance LLC. Brie pays the entire debt. Her right of contribution entitles her to recover any amount paid above the surety's obligation from

Cam and Dei.

Bob's Barber Shop borrows from first Credit Company and then Debit Loans LLC, using the same property as collateral for both loans. Debit Loans perfects its security interest. Credit Company does not. The debtor defaults on both loans. The party with first rights to the collateral is

Debit Loans LLC.

A debtor must have title to collateral to give a secured party a security interest in the property.

False

A fixed-rate mortgage is a standard mortgage with an adjustable rate of interest.

False

A secured party perfects a claim by filing a financing statement with the debtor.

False

A security interest can cover only property in which the debtor has present rights.

False

To buy a home, Lois pays part of the purchase price up front in cash and borrows the rest of the funds from Members Credit Union. The part of the purchase price paid up front is

a down payment.

Capital Inc. holds a security interest in Discount Store's inventory. The parties agree that the interest will continue in the collateral even if it is sold, exchanged, or disposed of in some other way. This is

a floating lien.

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property. This is

a lien

A voluntary petition in bankruptcy must include

a list of the debtor's creditors and the amount of the debt owed to each.

Coastal Bank agrees to lend Dobie the funds to buy a beach house. The loan has an unchanging rate of interest—the amount of each payment will be the same for the duration of the loan. In this deal, the borrower is

a mortgagor.

To purchase a house, Elma obtains a mortgage loan from Fidelity Bank. Later, Elma is unable to make payments on the loan. Meanwhile, the market value of the house has declined. Fidelity agrees to a sale of the property for less than the amount due on the loan. This is

a short sale

To make a sale to Gourmet Inc., Hill Valley Commodities asks Gourmet's outside accountant Ingre to co-sign a credit application. According to the terms, if Gourmet defaults, Hill Valley can look to Ingre for payment without first pursuing legal remedies against Gourmet. Ingre is

a surety.

Business Inc.'s debt to Cartage Company is past due. Cartage brings a legal action against Business to collect. To ensure that a judgment in the creditor's favor will be collectible, Cartage asks the court to order the seizure of the debtor's property. This is a request for

a writ of attachment.

Brew Pub Company's debt to Credit Service is past due. Credit obtains a judgment against Brew, but the firm refuses to pay. Credit asks the court to order the seizure of Brew's property. This is a request for

a writ of execution.

Personal property that is most often exempt from satisfaction of a creditor's judgment debt on a debtor's default, up to a specified amount, includes

all of the choices.

Under Chapter 7 and Chapter 11

all of the choices.

Compared to Chapter 7 and 11 plans, a Chapter 13 plan

allows a debtor to retain possession of his or her assets.

To buy a condo, Mary obtains a thirty-year mortgage with an interest rate that is fixed for three years and then adjusts annually. Mary's mortgage is

an adjustable-rate mortgage.

Eligible for relief on a petition in bankruptcy under Chapter 11 is

any debtor who is eligible under Chapter 7, and railroads.

Under Chapter 7, once the proceeds of the bankruptcy estate have been distributed, the debtor's remaining debts

are discharged.

Loan Office Inc. has a security interest against Manufacturing Company that is enforceable. In other words, with respect to the collateral, the creditor's rights are said to

attach.

To buy a townhouse, Becky obtains a mortgage loan from Countywide Bank. The lender should record the mortgage to

be officially on record as holding an interest in the property.

Auto Sales & Finance wants to get paid for its goods and services, so it will not sell goods or lend funds unless payment is guaranteed. To obtain those goods or services, a customer or borrower might pledge

collateral.

Rico borrows funds from Suburban Bank secured by Rico's house. Rico defaults on the debt. The bank's options include

disposing of the collateral in any commercially reasonable manner.

Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for

domestic support.

With respect to debtors, the main goal of bankruptcy law is to

provide a new start without creditors' claims.

If a voluntary petition in bankruptcy is found to be proper, the court's entry of an order for relief

puts into place an automatic stay.

To create an enforceable security interest for a loan, in terms of the collateral, the debtor must have

rights in it.

The UCC does not define the term default. This encourages the parties to a secured transaction to

stipulate the conditions that will constitute a default.

To create an enforceable security interest between Finance Corporation and Global Trade Inc. in a written security agreement, the agreement must contain a description of

the collateral.

To create an enforceable security interest between Mortgage Bank and National Property Company in a written security agreement, the agreement must be signed by

the debtor.

Under any chapter of the Bankruptcy Code, failing to file the necessary documents with the debtor's petition for relief can result in

the dismissal of the petition.

Because a mortgage involves the transfer of real property, to comply with the Statute of Frauds, it must be

written.