Law Chapters 29-31 - Unit 1 Assessment

Under Chapter 13, a repayment plan must provide for a. the same treatment of each claim within a particular class of claim. b. all of the choices. c. full payment of all claims, without exception. d. the turnover of the debtor's future income to the creditors.

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

T/F: The instrument normally filed to give public notice to third parties of a secured party's security interest is collateral.

false

T/F: Under Chapter 13, all debts are dischargeable.

false

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

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 a. Edie. b. Cam and Dei. c. Finance LLC. d. none of the parties.

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 a. Credit Company. b. Debit Loans LLC. c. Credit and Debit in proportion to the outstanding value of their loans. d. Bob's Barber Shop.

Debit Loans LLC

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 a. Mortgage Company. b. none of the choices. c. Lender Inc. d. Kiosk Jewelers.

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 a. the $5,000 owed on the contract. b. Ranch's personal property. c. Ranch's real estate. d. property held by a third party.

Ranch's real estate

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 a. the state in which the property is located. b. the general public. c. Vista Estate's other creditors. d. Vista Estate.

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. a debtor who filed jointly for bankruptcy under a single petition. b. a secured creditor. c. a bankruptcy court judge. d. a bankruptcy trustee.

a bankruptcy trustee.

In addition to financial statements, each voluntary petition in bankruptcy must include a. a plan outlining how debt payments will be made. b. a creditors' agreement allowing the debtor to continue in business. c. a statement of preference for one creditor over another. d. a certificate proving the receipt of credit counseling.

a certificate proving the receipt of credit counseling.

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. a prepayment penalty. b. a down payment. c. a mortgage. d. a short sale.

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. the right of redemption. b. a continuation statement. c. a purchase-money security interest. d. a floating lien.

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. a guaranty. b. a lien. c. a fraud. d. a garnishment.

a lien

A voluntary petition in bankruptcy must include a. proof of each creditor's claim. b. a statement indicating that the debtor understands basic economics. c. all of the choices. d. a list of the debtor's creditors and the amount of the debt owed to each.

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. a surety. b. a mortgagor. c. a guarantor. d. a mortgagee.

a mortgagor

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. an adjustment plan. b. a repayment plan. c. a reorganization. d. a liquidation.

a reorganization.

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. a foreclosure. b. forbearance. c. a workout agreement. d. a short sale.

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. a lienor. b. a creditor. c. a surety. d. a guarantor.

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. a writ of attachment. b. an artisan's lien. c. a writ of execution. d. a mechanic's lien.

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. an artisan's lien. b. a mechanic's lien. c. a writ of execution. d. a writ of attachment.

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 a. certain classified animals, usually including livestock. b. all of the choices. c. equipment used in a business or trade, such as tools. d. a vehicle for transportation.

all of the choices

Under Chapter 7 and Chapter 11 a. the same principles govern the entry of the order for relief. b. all of the choices. c. the automatic stay provision applies. d. petitions can be filed voluntarily or involuntarily.

all of the choices

Compared to Chapter 7 and 11 plans, a Chapter 13 plan a. is more expensive and more complicated. b. permits any interested party to file a repayment plan. c. permits creditors to force a debtor into involuntary bankruptcy. d. allows a debtor to retain possession of his or her assets.

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 a. a workout agreement. b. a short sale. c. a fixed-rate mortgage. d. an adjustable-rate mortgage.

an adjustable-rate mortgage

Eligible for relief on a petition in bankruptcy under Chapter 11 is a. an individual, not a partnership or a corporation, with regular income and debts of less than a certain amount. b. any debtor who is eligible under Chapter 7, and railroads. c. any "person" except railroads and certain financial institutions. d. any party who is not eligible under a different chapter of the Code.

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 a. paid by the court. b. subject to legal actions to recover any unpaid amounts. c. renewed without legal action as obligations of the debtor. d. are discharged.

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 a. process. b. attach. c. perfect. d. mature.

attach

To buy a townhouse, Becky obtains a mortgage loan from Countywide Bank. The lender should record the mortgage to a. be officially on record as holding an interest in the property. b. secure itself in the position of an unsecured creditor. c. preserve a copy of the loan in a separate location. d. obtain reimbursement for a portion of the loan if the debtor defaults.

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 a. collateral. b. forbearance. c. a composition agreement. d. allegiance.

collateral

T/F: 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

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

false

Rico borrows funds from Suburban Bank secured by Rico's house. Rico defaults on the debt. The bank's options include a. repossessing the collateral and disavowing the security interest. b. destroying the collateral and collecting the unpaid debt from Reg. c. disposing of the collateral in any commercially reasonable manner. d. retaining the security interest and pursuing a judicial remedy.

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 a. student loans. b. the debtor's equity in his or her residence. c. domestic support. d. debts related to motor vehicles, household goods, and trade tools.

domestic support.

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

false

T/F: A fixed-rate mortgage is a standard mortgage with an adjustable rate of interest.

false

T/F: A secured party perfects a claim by filing a financing statement with the debtor.

false

T/F: A security interest can cover only property in which the debtor has present rights.

false

T/F: A security interest cannot become perfected without the filing of a security agreement.

false

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

false

T/F: Bankruptcy relief is provided under state, not federal, law.

false

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

false

T/F: 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

T/F: Businesses must be technically insolvent to file for bankruptcy relief.

false

T/F: Equitable redemption allows a lender to gain title and regain possession of a property.

false

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

false

T/F: 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

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

false

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

false

All bankruptcy proceedings are held in a. federal bankruptcy courts. b. local small-claims courts. c. special cross-jurisdictional debtors courts. d. state bankruptcy courts.

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 a. correcting grammatical errors in the parties' written agreement. b. insuring the property for the full amount of its value. c. calculating the precise amount of the debt. d. filing a financing statement with the appropriate authority.

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 a. goodwill. b. good faith. c. substantial means. d. sufficient credit.

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 a. is automatically perfected. b. can be perfected only by repossession. c. can be perfected only by filing. d. cannot be perfected.

is automatically perfected.

An involuntary bankruptcy occurs when a debtor a. is forced into bankruptcy proceedings by his or her creditors. b. is unable to pay his or her debts as they come due. c. has debts that exceed the fair market value of his or her assets. d. files forms designated for the purpose.

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 a. redemption. b. levy. c. execution. d. retention.

levy

Chapter 7 of the Bankruptcy Code provides for a. the adjustment of debts of businesses—not individuals. b. the reorganization of the obligations of the debtor. c. liquidation proceedings. d. the adjustment of debts of individuals—not businesses.

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 a. perfection. b. retention. c. redemption. d. assignment.

perfection

With respect to debtors, the main goal of bankruptcy law is to a. provide a new start without creditors' claims. b. shield assets from creditors' claims. c. ensure that third parties will continue to guarantee loans. d. encourage the continued use of credit.

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 a. puts into place an automatic stay. b. discharges the debtor's obligations. c. distributes the debtor's assets to his or her creditors. d. dismisses the petition.

puts into place an automatic stay.

To create an enforceable security interest for a loan, in terms of the collateral, the debtor must have a. rights in it. b. possession of it. c. title to it. d. proof of its value.

rights in it

The UCC does not define the term default. This encourages the parties to a secured transaction to a. provide the creditor with the maximum protection possible. b. include standards that align with the concept of unconscionability. c. run counter to the UCC's provision regarding good faith. d. stipulate the conditions that will constitute a default.

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 a. all of the choices. b. the debtor. c. the collateral. d. the creditor.

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 a. all of the choices. b. a disinterested third-party witness. c. the debtor. d. the creditor.

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 a. the dismissal of the petition. b. the discharge of the debtor's obligations. c. an automatic stay. d. the distribution of the debtor's assets to his or her creditors.

the dismissal of the petition.

T/F: A lender can require a borrower to maintain the property in such a way that the lender's investment is protected.

true

T/F: A mortgage gives a creditor a lien on a debtor's real property as security for payment of a debt.

true

T/F: Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11.

true

T/F: Attachment ensures that a security interest between a debtor and a secured party is effective.

true

T/F: 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

T/F: Improper filing of a financing statement can render a security interest unperfected.

true

T/F: In Missouri, mechanic's liens are recorded in the circuit court clerk's office of the county where the job is physically located.

true

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

true

T/F: 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

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

true

Because a mortgage involves the transfer of real property, to comply with the Statute of Frauds, it must be a. witnessed by a disinterested third party. b. recorded. c. in good faith. d. written.

written