Question 1

________ is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Accepted Answer

A)  purchase money security interest 
B)  cumulative security interest 
C)  future advance monetary interest 
D)  default interest 
A)  purchase money security interest 
B)  cumulative security interest 
C)  future advance monetary interest 
D)  default interest A

Question 2

Outline the priority of claims in secured and unsecured transactions.

Accepted Answer

a) A creditor who has the only secured interest in the debtor's collateral has priority over unsecured interests.
b) If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, the first to attach has priority.
c) If two or more secured parties claim an interest in the same collateral but only one has perfected his or her security interest, the perfected security interest has priority.
d) If two or more secured parties have perfected security interests in the same collateral, the first to perfect (e.g., by filing a financing statement, by taking possession of the collateral) has priority.
e) If a security interest in goods is perfected but the goods are later commingled with other goods in which there are also perfected security interests, and the goods become part of a product or mass and lose their identity, the security interests rank equal and according to the ratio that the original cost of goods of each security interest bears to the cost of the total product or mass.

Question 3

Under Chapter 13, a debtor retains more property than is exempt under Chapter 7 liquidation.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

Accepted Answer

A)  two-party secured 
B)  three-party secured 
C)  perfected 
D)  attached 
A)  two-party secured 
B)  three-party secured 
C)  perfected 
D)  attached

Question 5

Gifts that a debtor is entitled to receive within 180 days after the petition is filed are part of the bankruptcy estate.

Accepted Answer

A) True 
 B)False

Question 6

What is a homestead exemption?

Accepted Answer

A)  investment in realty that a debtor must forfeit 
B)  equity in a home that a debtor is permitted to retain 
C)  remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims 
D)  all of the debtor's assets converted to cash 
A)  investment in realty that a debtor must forfeit 
B)  equity in a home that a debtor is permitted to retain 
C)  remainder of the debtor's interest in commercial property that is returned to him after fulfilling creditors' claims 
D)  all of the debtor's assets converted to cash

Question 7

In a guaranty agreement, the guarantor is primarily liable on the debt.

Accepted Answer

A) True 
 B)False

Question 8

The surety is primarily liable for paying the principal debtor's debt when it is due in a surety arrangement.

Accepted Answer

A) True 
 B)False

Question 9

In a mortgage transaction, the creditor is known as the mortgagee.

Accepted Answer

A) True 
 B)False

Question 10

Unsecured credits require collateral to protect the payment of the debt.

Accepted Answer

A) True 
 B)False

Question 11

To be valid, a security agreement must set forth the creditor's rights upon the debtor's default.

Accepted Answer

A) True 
 B)False

Question 12

An executory contract refers to a contract or lease that has not been fully performed.

Accepted Answer

A) True 
 B)False

Question 13

Liquidation is a form of bankruptcy in which the debtor's exempt property is auctioned.

Accepted Answer

A) True 
 B)False

Question 14

In a(n)________ arrangement, a third party promises to be secondarily liable for the payment of another's debt.

Accepted Answer

The answer of In a(n)________ arrangement, a third party promises...

Question 15

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

Accepted Answer

A) True 
 B)False

Question 16

A(n)________ is a statutory lien given to workers on personal property to which they furnish services or materials in the ordinary course of business.

Accepted Answer

A)  super-priority lien 
B)  floating lien 
C)  artisan's lien 
D)  judgment lien 
A)  super-priority lien 
B)  floating lien 
C)  artisan's lien 
D)  judgment lien

Question 17

Chapter 7 of the Bankruptcy Code deals with ________ form of bankruptcy.

Accepted Answer

The answer of Chapter 7 of the Bankruptcy Code deals...

Question 18

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

Accepted Answer

The answer of The suspension of certain legal actions by...

Question 19

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash, the cash is distributed to the creditors, and any unpaid debts are discharged.

Accepted Answer

A)  abusive filing 
B)  dissolution of debt 
C)  liquidation 
D)  reorganization 
A)  abusive filing 
B)  dissolution of debt 
C)  liquidation 
D)  reorganization

Question 20

A contract or lease that has not been fully performed is termed as a(n)________ contract.

Accepted Answer

The answer of A contract or lease that has not...

Exam 13: Credit, Secured Transactions, and Bankruptcy

________ is an interest a creditor automatically obtains when he or she extends credit to a consumer to purchase consumer goods.

Outline the priority of claims in secured and unsecured transactions.

Under Chapter 13, a debtor retains more property than is exempt under Chapter 7 liquidation.

Which of the following transactions occurs when a seller sells goods to a buyer on credit and retains a security interest in the goods?

Gifts that a debtor is entitled to receive within 180 days after the petition is filed are part of the bankruptcy estate.

What is a homestead exemption?

In a guaranty agreement, the guarantor is primarily liable on the debt.

The surety is primarily liable for paying the principal debtor's debt when it is due in a surety arrangement.

In a mortgage transaction, the creditor is known as the mortgagee.

Unsecured credits require collateral to protect the payment of the debt.

To be valid, a security agreement must set forth the creditor's rights upon the debtor's default.

An executory contract refers to a contract or lease that has not been fully performed.

Liquidation is a form of bankruptcy in which the debtor's exempt property is auctioned.

In a(n)________ arrangement, a third party promises to be secondarily liable for the payment of another's debt.

Article 9 of the Uniform Commercial Code governs secured transactions in personal property.

A(n)________ is a statutory lien given to workers on personal property to which they furnish services or materials in the ordinary course of business.

Chapter 7 of the Bankruptcy Code deals with ________ form of bankruptcy.

The suspension of certain legal actions by creditors against a debtor or the debtor's property is known as a(n)________.

________ is a form of bankruptcy in which the debtor's nonexempt property is sold for cash, the cash is distributed to the creditors, and any unpaid debts are discharged.

A contract or lease that has not been fully performed is termed as a(n)________ contract.

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