LSE Chapter 15

How do a current holder's rights compare to the rights of the previous holder? Choose 2 answer choices.

If the previous holder was a holder in due course, the new holder is a holder in due course. A holder in due course can have greater rights and protections than the previous holder.

Millie did not sign a negotiable instrument. How could Millie be liable for an instrument without having signed it? Choose 3 answer choices.

Millie was negligent by allowing people to think that she may have signed the instrument. Millie decided she liked the terms of the negotiable instrument and ratified the instrument. Millie's authorized agent signed the instrument.

Shawn will pay Craig with a negotiable instrument, and Shawn plans to involve a third party in that process. What instrument should he use? Choose 2 answer choices.

check draft

Nicole transferred a negotiable instrument to Andy. Andy later sues Nicole alleging a breach of presentation warranty. What could Andy claim Nicole has violated?

Andy could allege that Nicole was aware of an unauthorized signature.

Which feature is a requirement for a negotiable instrument to be a valid draft instrument? Choose 2 answer choices.

Drafts must designate a financial institution. Drafts must state a definite amount of money to be paid.

Lee Park was an executive for a large corporation. His base salary, which was calculated on a formula tied to the company income, averaged $338,500 over a five-year period. Because of a recent divorce (within the last year), Lee owed his ex-wife $4,350 per month in spousal support. Lee owed back taxes to the IRS of $210,000, which required him to pay $2,800 per month in addition to current tax payments. Lee owed $150,000 in student loan debt. As a result of his divorce, Lee became the sole owner of his home, which was worth $900,000 and had a $600,000 mortgage on it with Bank of the US.

Identifying the Facts and Issues In this case, Lee Park (the debtor) filed a Chapter 7 bankruptcy. Under this type of bankruptcy, the debtor is required to file a list of secured and unsecured creditors as well as several other lists, known as schedules . Lee's payments to his wife generally would not be dischargeable in bankruptcy. Student loans generally are not dischargeable in bankruptcy. Assessment question Under the federal exemptions, Lee normally would be allowed some portion of equity in his home. Because Lee did become the sole owner of the house (with responsibility for the mortgage) within the last three years, Lee did have a federal maximum equity exemption. According to the federal limit in the book, Lee should not be able to claim a homestead exemption for the full amount of the equity in his home. Assessment question If the median income in Lee's state for a single person was $47,000, there would be a presumption of bankruptcy abuse by Lee. If Lee had to complete the means test, the Court would deduct living expenses from his monthly disposable income to decide whether Lee could pay any of his unsecured debt. In this situation, given Lee's income, it is likely that he would have his case dismissed or converted to a Chapter 13. Assessment question What If the Facts Were Different? Assume that Lee Park was not an executive but instead was a line worker making $41,000 per year. His spousal support was $1,000 per month and his home was worth $365,000 with a $290,000 mortgage. He did not have student loans and did not owe any back taxes. The state median income was still $47,000. In this case, Lee's income was not higher than the state median. Because of this, there would not be a presumption of bankruptcy abuse. Assessment question Lee's equity in his house would be $75,000 . This amount of equity is lower than the federal limit. Lee would receive the entire amount of equity in his home.

Miranda received a draft in the mail and is concerned it is not valid. What issue or feature could invalidate a draft?

No drawee is mentioned.

Shawn is creating a negotiable instrument to give to Craig and Shawn does not want to involve a financial institution. Which type of negotiable instrument will Shawn make?

Promissory Note

Which of the holder in due course rules or requirements gives rights or requirements to a new holder based on the status of the previous holder?

Shelter Rule Principle

What party to a negotiable instrument is involved with both an order to pay and a promise to pay?

payee

Which party is involved with a certificate of deposit? Choose 2 answer choices.

payee maker