Business Law - Commercial Exam 4 Studyguide

Bagsby owns a business selling insects for organic gardening. Bagsby is seeking a loan from First national Bank. The loan officer is asking that the loan be secured by Bagsby's inventory of insects, now owned or hereafter acquired. In order to do this, a new security agreement will need to be signed each time Bagsby gets new insects or sells his insects.

False.

Chapter 7 bankruptcy petitions may only be filed voluntarily.

False.

The initial term for which a financing statement will be effective is...

Five years.

A Chapter 7 debtor's agreement to pay a creditor on a debt after receiving a discharge in bankruptcy is called a...

Reaffirmation.

Donna defaulted on her loan owned to Second State Savings and Loan. The loan was secured with Donna's car. Donna used the car for personal and family reasons. Which statement is correct?

Second State may take Donna's car without a court order if this can be done without a breach of the peace.

The correct order of payment of claims from the debtor's estate would be...

Secured claims, priority claims, unsecured claims.

Legal requirements for a will depend on state law, but generally include all but which of the following?

Signatures of at least three witnesses.

Chapter 7 bankruptcy is also known as...

Straight bankruptcy.

Which of the following is a requirement for an involuntary Chapter 7 bankruptcy petition?

The debtor must have at least three creditors sign the petition if the debtor has 12 or more creditors.

Under the federal Bankruptcy Code, the exemption amount for the debtor's personal residence is...

$22,975.

Which of the following does NOT act as a revocation of a will?

Creating a codicil.

Who operates the business and develops a plan of reorganization in Chapter 11 bankruptcies?

The debtor in possession.

Estate planning has two primary goals: to ensure property is distributed as the owner desires and to minimize estate taxes.

True.

Generally, filing bankruptcy stops the collection activity of creditors.

True.

The trustee is responsible for gathering the bankrupt's assets and dividing them among creditors.

True.

Which of the following is NOT required to create a valid trust?

Witnesses.

The percentage of people dying without a will is approximately...

65%.

Which of the following is an example of a purchase money security interest in consumer goods?

A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels.

When two creditors have a security interest int he same collateral, which party takes priority?

A party with a perfected interest.

Which of the following statements concerning a Chapter 11 reorganization plan is true?

A reorganization plan can be confirmed by the court over objections of some creditors if the court determines that the plan is feasible and fair.

Which of the following is true about wills?

A will can be amended to change specific terms by execution of a codicil.

Grand Lighting Co. has filed a petition for voluntary bankruptcy under Chapter 7 of the Code. Which of the following will prohibit creditors from collecting debts that Grand Lighting incurred before the petition is filed?

An automatic stay.

Under the Uniform Anatomical Gift Act...

An effective donation may be made by an individual in a will or on a witnessed organ-donation card or by family members after the person's death as long as the person did not indicate a desire not to be a donor.

In order to travel extensively and not worry about handling her affairs, Lee transfers most of her assets into a trust, with her bank serving as trustee. She has created ___ trust.

An inter vivos.

An official acknowledgement that a debtor is under the jurisdiction of the bankruptcy court is called...

An order for relief.

Chapter 13 bankruptcy...

Can be used only by individuals with a regular source of income.

Agnes plans to file for bankruptcy under Chapter 7. One month prior to filing, Agnes gives Joe's Filling Station $700 to apply to her gas bill. Joe has been so kind to let her charge the gas she needed for her car over the past year. The bankruptcy trustee appointed to the case...

Can cancel the payment to Joe as a voidable preference.

Andy's business is not able to pay its debts, and the prospects for its finances to improve are slim. Andy decides not to continue the business. In this case, Andy should file a voluntary petition for which types of bankruptcy?

Chapter 7.

If repossessed collateral is sold or otherwise disposed of by the creditor, then by the time, place, manner, and method of disposal must be...

Commercially reasonable.

At her neighbor's garage sale, Constance buys a vanity dressing table from her neighbor, Carlos, for $160. Constance purchased the vanity table for her own personal use, without any knowledge that Carlos has signed a security agreement giving All Purpose Furniture Inc. a security interest in the vanity table. All Purpose Furniture did not file a financing statement. Constance does not know that Carlos is still paying off the purchase money security interest and owes All Purpose Furniture, Inc. $400. Under these circumstances:

Constance takes the vanity table free of All Purpose's security interest because she is a buyer of consumer goods.

Joel is displeased with his son's lifestyle choices and instead of dividing his estate, Joel wants to leave all of his property to his daughter. Joel may...

Disinherit his son for any reason as long as Joel indicates int he will that the son was omitted on purpose.

Iris received a discharge under a Chapter 7 bankruptcy. She cannot receive another discharge under Chapter 7 for at least...

Eight years after the prior filing.

The major disadvantage of a trust is

Expense

Dr. Gavornne advises his very ill patients to prepare a living will. The purpose of a living will is to...

Express a desire not to have extreme medical treatment that would prolong their lives.

Lying on her hospital bed alone one night, Phyllis grabs a pen and paper. with the last of her strength, she wrote her last will and testament leaving all her worldly possessions to her next-door neighbor, Aaron. This type of will is a...

Holographic will.

Myron had two children, Cheryl and Pete, who predeceased him. Cheryl had three children and Pete had one child. Myron had a will. Which of the following is true?

If Myron's will indicates that the issue are to inherit per stirpes, Pete's child will receive one half of Myron's estate.

Creditors of Northern Hydraulics file an involuntary bankruptcy petition against he company and the petition is approved. What is true of Northern Hydraulics?

It must make all the filings necessary under a voluntary petition.

Which of the following property is NOT affected by a will?

Life insurance.

Debts that cannot be discharged in bankruptcy include all EXCEPT:

Money owed to utility companies.

First Bank loaned $400,000 to Thomas, taking a security interest in his yacht. Thomas defaulted on the loan and First Bank repossessed the boat. First Bank sold the yacht at a public sale. The sale yielded $50,000 more than the debt. First Bank...

Must pay Thomas $50,000.

Country Bank, located in Indiana, loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns. Chmelik lives in Illinois, but works in Indiana. In order to perfect its interest, County Bank files a financing statement in Indiana. The financing statement provides Chmlik's correct name, his business address, and a reasonable description of the copyright used as collateral. Is the financing statement sufficient?

No, if the debtor is an individual, the secured party must file in the state of the debtor's principal residence which in this case would be Illinois.

Kathleen filed for voluntary bankruptcy and the automatic stay went into effect. The automatic stay...

Prohibits creditors from collecting debts against Kathleen that arose before she filed bankruptcy.

The series of steps a secured party must take to protect its rights in the collateral against people other than the debtor is called...

Perfection.

All but which of the following may be used as collateral in a secured transaction under UCC Article 9?

Personal injury tort claims of individuals.

To perfect a security interest in a negotiable document, Second State Savings and Loan should...

Take possession of the instrument.

A trust created in a will is...

Testamentary trust.

The state of the bankruptcy process is...

The bankruptcy court's issuance of an order for relief.

Great State Bank loans money to Seth, securing the loan with property owned by Seth. Great State Bank is advised by its attorney to file a financing statement. Great State Bank doesn't understand why it should spend the extra money for this filing since Seth has told them that he has another creditors. Why should Great State Bank file a financing statement?

The financing statement will protect Great State's priority rights with other creditors by giving notice to other creditors that it claims a security interest in the collateral.

Which of the following is a primary goal of the Bankruptcy Code?

To preserve as much of the debtor's property as possible.

When a debtor no longer has an obligation to pay a debt, that debt has been...

discharged.