Chapter 13 Negotiable Instruments FINA 2244

When a debtor petitions the court for Chapter 7 bankruptcy, which item(s) must be provided?

All of the other choices

Negotiable instruments do not include:

All of the other choices are negotiable instruments

Which of the following debts are not extinguished by a Chapter 7 bankruptcy?

All of the other choices; or Alimony

In a(an) ____, goods and services are sold on an invoice that shows transactions; full payment is expected within a fixed time period.

Open account

Inventory may be used as collateral for a loan. If it is, the inventory is classified as:

Tangible property

When a note is to be paid in regular payments but also includes a final payment more than double the regular payments, the note is called:

A balloon note

A mortgage will typically contain:

A description of the property and the amount of debt involved

Under Article 3 of the UCC, a check is:

A draft drawn on a bank and payable on demand

Under the UCC, to avoid the problem of constantly issuing new financing contracts every time a business buys more inventory from a supplier, the parties may use:

A floating lien

If a creditor is successful in a legal action against a debtor, the court will award the creditor:

A judgement lien

When a debtor petitions the court for Chapter 7 bankruptcy, which of the following items need not be provided?

A list of planned future expenditures

Karen's Kitchens renovates Mark's old kitchen. Mark only pays part of his bill. To help try to collect the rest of the money owed her, Karen may obtain:

A mechanic's lein

Under Article 3 of the UCC, a note is:

A promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at a date in the future

The draft that requires immediate payment by the drawee to the payee, which is true of a check, is called:

A sight draft

The trustee in bankruptcy:

Administers the debtor's estate

According to the UCC, a draft may be:

All of the other specific answers are correct

Chapter 11 bankruptcies, which are filed by businesses:

Allow a business to keep operating under recognization of its activities and its debts

When a company gives credit to a customer, it may create which of the following?

An installment account or an open account

Under Article 3 of the UCC, a draft is:

An unconditional written order to pay that involves three parties: drawer, drawee, payee; the drawee may be a bank, person, or business; payment may be set at a future time

A secured creditor is one who:

Can take a debtor's property to try to satisfy the debt

Negotiable instruments under the UCC do not include:

Cash

Hill owned a roofing business that had an account at Lowe's to buy supplies. He sold the business to his employees who had used the account. When he sold the business, he asked a person at Lowe's to close the account. The account documents stated that to close the account, Hill must contact Lowe's headquarters in writing, but he did not. His former employees then ran up a bill on the account. Lowe's sued Hill for the balance due as the former employees were bankrupt. Most likely, the court would hold that Lowe's could:

Collect from Hill because he failed to close the account properly

A business that extends credit to buyers should establish:

Credit and collection policies

To raise needed capital, small companies most often rely on:

Debt financing

Under a Chapter 13 bankruptcy the:

Debtor keeps the estate's property and the estate is administered jointly with a court-appointed trustee

The final stage of bankruptcy is known as:

Discharge in bankruptcy

What defense(s) is (are) available to sureties?

Duress, Fraud, or Impossibility

When a business lends another business money, it should perfect its security interest by:

Filing its financing statement with the state secretary of state

If a negotiable instrument is transferred by negotiation, the transferee takes the instrument:

Free of the transferor's responsibilities

An open account means:

Full payment is due within a fixed time period

Fern sells Ryan a 52" plasma television. Ryan does not have the cash necessary to buy the TV, so Fern allows him to make 12 monthly payments. If Ryan misses any payments, Fern may take the TV back. Fern:

Has a security interest

A suretyship is most often required for:

Major debts

Once bankruptcy proceedings are finished, the consumer's credit record:

May note the bankruptcy for ten years

Besides being written, an unconditional order or promise to pay, must be made out for a definite sum of money. To be negotiable under Article 3 of the UCC, an instrument also must meet which of the following requirements it:

Must be payable on demand or at a specified time period and must be signed by the maker or the drawer and must be made out "to order" or "to bearer"

Don borrows $90,000 to buy a home. His mortgage is with Western Bank. Don is unable to make his mortgage payments. Western forecloses on Don's house and sells it in a judicial sale. The bank gets $95,000 for the house. In this case, it:

Must return the extra $5000 to Don

Most large certificates of deposit are:

Negotiable

Before a person may file for bankruptcy the person must:

None of the other choices

Debts of the bankrupt under Chapter 13

None of the other choices

If a creditor is successful in a legal action against a debtor, the court will award the creditor

None of the other choices

If a negotiable instrument is assigned, the assignee has:

None of the other choices

In a(an) ____, the debtor makes a minimum monthly payment and more debt can be added to the account over time.

None of the other choices

John bought a ring for Sue on credit. After six months John defaulted on his debt to Big Rock Jewelers. Big Rock sues John for payment of his debt. If Big Rock is worried that John might sell the ring before court proceedings, something it doesn't want to happen, it should obtain:

None of the other choices

The law concerning liens is primarily:

None of the other choices

The law regarding the kinds of credit that may be applied to personal property is:

None of the other choices

The most common lien on personal property is:

None of the other choices

The most common lien on real property is:

None of the other choices

The primary distinction in secured credit transaction is whether the property:

None of the other choices

To create a legally valid security interest, a business must ensure that the interest is:

None of the other choices

If an instrument is determined to be nonnegotiable, and a dispute arises, Article 3 will:

Not apply and the parties will need to resolve their dispute with reference to the common law of contracts

A commercial instrument where one party has a legal obligation to pay another party a certain sum of money and involves a maker and a payee only is called:

Note

If a debtor refuses to pay an unsecured creditor, and the debtor is insolvent, the unsecured creditor collects:

Nothing

Each year, approximately how many individuals in the U.S. file for bankruptcy?

Over one million

A sight draft is:

Payable upon presentation by the seller to the buyer of the goods

In order to establish a superior right, a creditor must:

Perfect the security interest

The law of mortgages comes from:

State common law and some state real estate statutes

The law concerning liens is primarily

State law, either common or statutory

The law of mortgages comes from: Part 2

State real estate law

Negotiable instruments are not:

Subject to Article 2 of the UCC

Negotiable instruments:

Substitute for cash

A guarantor is generally the same as:

Surety

Candy bought a sofa from Max on credit. She is to make 5 monthly payments of $200 each. After one month Candy stops making payments. Max is a secured creditor; he may:

Take steps to repossess the sofa from Candy

TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier's check. Choi then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course. The bank paid that third party. TP declares it is out of business. In a subsequent lawsuit:

The court will find that the third party is a holder in due course, and despite the fact that TP has defrauded Choi, not require the third party to repay Choi

The powers of a debtor in possession are balanced by:

The creditor's committee

An attached interest means:

The customer has transferable rights in the collateral and has signed the debt instrument

The one who agreed to make a payment, such as a bank making a payment based on a document presented to it is:

The drawee

The one who issues or creates the document that requests payment, probably from a bank, is called:

The drawer

In some cases, the property of a debtor will not be available to a creditor who wishes to attach and sell it to satisfy an outstanding debt. Exempt property often includes:

The family house, car, and some tools used in trade

The one who receives payment from a negotiable instrument is called:

The payee

Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the funds. Billy convinces Gary to back-up his credit. On the loan, Billy is:

The principal

Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the funds. Billy convinces Gary to back-up his credit. Gary is:

The surety

A creditor can obtain the property of a debtor:

Through operation of law and if the debtor enters into such an arrangement

Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First requires Mike to pay the balance of the loan. In this case, Mike may sue:

Tiny to reimburse or exonerate him

If a debtor cannot meet credit obligations it is said:

To default

The primary objective of the trustee is:

To maximize the amount of the debtor's assets available for distribution to creditors

Under a Chapter 13 proceeding, debts must be repaid usually:

Within five years

According to the UCC, a creditor may repossess a product in which it has a security interest:

Without judicial process so long as it does not cause a breach of peace