Question 1

The UCC requires that a precise form be followed in order to create a security interest.

Accepted Answer

A) True 
 B)False  False

Question 2

Chapter 13 does not provide a bankruptcy discharge for corporations.

Accepted Answer

A) True 
 B)False  True

Question 3

A ________ is an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until another creditor of the same debtor is fully paid.

Accepted Answer

A)  participation loan 
B)  cross-collateralization 
C)  debt subordination 
D)  lien subordination 
A)  participation loan 
B)  cross-collateralization 
C)  debt subordination 
D)  lien subordination C

Question 4

A loan agreement may be preceded by a(n)_______ which is a letter outlining the terms and conditions on which the lender will lend.

Accepted Answer

A)  term sheet 
B)  advance notification 
C)  contract addendum 
D)  attachment 
A)  term sheet 
B)  advance notification 
C)  contract addendum 
D)  attachment

Question 5

Which of the following was the result in In re Bryan Road,the case in the text involving the issue of whether a prebankruptcy waiver of the automatic stay in a prepetition workout was enforceable?

Accepted Answer

A)  After considering a number of factors, the court concluded that the waiver of the automatic stay would be enforced. 
B)  The court ruled as a matter of law that such agreements are contrary to the principles set forth in the federal bankruptcy statutes and that such agreements are, therefore, unenforceable. 
C)  The court ruled as a matter of law that such agreements are enforceable. 
D)  The court ruled that such agreements are enforceable only if all other creditors are paid in full. 
A)  After considering a number of factors, the court concluded that the waiver of the automatic stay would be enforced. 
B)  The court ruled as a matter of law that such agreements are contrary to the principles set forth in the federal bankruptcy statutes and that such agreements are, therefore, unenforceable. 
C)  The court ruled as a matter of law that such agreements are enforceable. 
D)  The court ruled that such agreements are enforceable only if all other creditors are paid in full.

Question 6

A(n)_______ subordination is an agreement between two secured creditors by which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law.

Accepted Answer

A)  unenforceable 
B)  debt 
C)  lien 
D)  equitable 
A)  unenforceable 
B)  debt 
C)  lien 
D)  equitable

Question 7

In order to arrive at an actual interest rate,a ________ is an amount added to the bank's theoretical cost of obtaining funds to lend.

Accepted Answer

A)  spread 
B)  base 
C)  reference 
D)  security 
A)  spread 
B)  base 
C)  reference 
D)  security

Question 8

Requirements that must be met under the loan agreement before the lender's obligations arise are known as ________.

Accepted Answer

A)  conditions precedent 
B)  conditions concurrent 
C)  conditions subsequent 
D)  loan qualifiers 
A)  conditions precedent 
B)  conditions concurrent 
C)  conditions subsequent 
D)  loan qualifiers

Question 9

After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement.

Accepted Answer

A) True 
 B)False

Question 10

In a ________ bankruptcy under Chapter 11,the debtor solicits votes on its plan of reorganization and only files for Chapter 11 protection after it has obtained the required votes in favor of the plan.

Accepted Answer

A)  preapproved 
B)  preplanned 
C)  prepackaged 
D)  prenegotiated 
A)  preapproved 
B)  preplanned 
C)  prepackaged 
D)  prenegotiated

Question 11

A Chapter 7 discharge is not available to a debtor who has received a discharge in a bankruptcy filed in the preceding _______ years or in a Chapter 13 case filed in the preceding _______ years.

Accepted Answer

A)  two, four 
B)  six, seven 
C)  eight, six 
D)  seven, six 
A)  two, four 
B)  six, seven 
C)  eight, six 
D)  seven, six

Question 12

A ________ interest rate fluctuates throughout the life of the loan according to the interest rate that the lender would pay if it borrowed the funds in order to relend them.

Accepted Answer

A)  fixed 
B)  principal 
C)  base 
D)  floating 
A)  fixed 
B)  principal 
C)  base 
D)  floating

Question 13

A bank's ________ rate is the lowest published rate of interest at which the bank lends to its best and most creditworthy commercial customers.

Accepted Answer

A)  lien 
B)  term 
C)  prime 
D)  secured 
A)  lien 
B)  term 
C)  prime 
D)  secured

Question 14

While state restrictions may apply,there are no federal restrictions on lenders and borrowers entering into transactions whereby secured credit will be sued to acquire stock.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following makes a security interest created under Article 9 a floating lien?

Accepted Answer

A)  The provision that, unless otherwise agreed, a security agreement gives the secured party a security interest in the proceeds if the collateral is sold, exchanged, collected, or otherwise disposed of. 
B)  The provision that, unless otherwise agreed, a security agreement fails to give the secured party a security interest in the proceeds if the collateral is sold, exchanged, collected, or otherwise disposed of. 
C)  The provision that, unless otherwise agreed, interest rates will vary depending on the prime rate of interest. 
D)  The provision that, unless otherwise agreed, the parties will not sell, exchange, collect, or otherwise dispose of property and that if such an action is taken, all sums owed become immediately due. 
A)  The provision that, unless otherwise agreed, a security agreement gives the secured party a security interest in the proceeds if the collateral is sold, exchanged, collected, or otherwise disposed of. 
B)  The provision that, unless otherwise agreed, a security agreement fails to give the secured party a security interest in the proceeds if the collateral is sold, exchanged, collected, or otherwise disposed of. 
C)  The provision that, unless otherwise agreed, interest rates will vary depending on the prime rate of interest. 
D)  The provision that, unless otherwise agreed, the parties will not sell, exchange, collect, or otherwise dispose of property and that if such an action is taken, all sums owed become immediately due.

Question 16

Agreements for term or revolving loans may call for mandatory prepayment when certain events occur.

Accepted Answer

A) True 
 B)False

Question 17

In a(n)________ loan,more than one lender enters into concurrent direct obligations with the borrower to make the loan.

Accepted Answer

A)  participation 
B)  term sheet 
C)  syndicated 
D)  illegal 
A)  participation 
B)  term sheet 
C)  syndicated 
D)  illegal

Question 18

An equipment lease that serves the purpose of financing is known as a(n)________ lease.

Accepted Answer

A)  finance 
B)  temporary 
C)  lending 
D)  debtor's 
A)  finance 
B)  temporary 
C)  lending 
D)  debtor's

Question 19

A provision in a loan agreement that the borrower cannot incur additional debt beyond a certain amount is an example of a(n)_______ covenant.

Accepted Answer

A)  absolute 
B)  prohibitive 
C)  negative 
D)  affirmative 
A)  absolute 
B)  prohibitive 
C)  negative 
D)  affirmative

Question 20

With a(n)_______ guaranty,subsidiaries guarantee,or pledge their assets as security for,the parent's debt.

Accepted Answer

A)  downstream 
B)  upstream 
C)  leveraged 
D)  subordination 
A)  downstream 
B)  upstream 
C)  leveraged 
D)  subordination

Exam 23: Debtor-Creditor Relations and Bankruptcy

The UCC requires that a precise form be followed in order to create a security interest.

Chapter 13 does not provide a bankruptcy discharge for corporations.

A ________ is an agreement whereby one or more creditors of a common debtor agree to defer payment of their claims until another creditor of the same debtor is fully paid.

A loan agreement may be preceded by a(n)_______ which is a letter outlining the terms and conditions on which the lender will lend.

Which of the following was the result in In re Bryan Road,the case in the text involving the issue of whether a prebankruptcy waiver of the automatic stay in a prepetition workout was enforceable?

A(n)_______ subordination is an agreement between two secured creditors by which the subordinating party agrees that the lien of the other creditor will have priority notwithstanding the relative priorities that the parties' liens would otherwise have under applicable law.

In order to arrive at an actual interest rate,a ________ is an amount added to the bank's theoretical cost of obtaining funds to lend.

Requirements that must be met under the loan agreement before the lender's obligations arise are known as ________.

After-acquired property is property that the debtor acquires after the repayment of a loan under a security agreement.

In a ________ bankruptcy under Chapter 11,the debtor solicits votes on its plan of reorganization and only files for Chapter 11 protection after it has obtained the required votes in favor of the plan.

A Chapter 7 discharge is not available to a debtor who has received a discharge in a bankruptcy filed in the preceding _______ years or in a Chapter 13 case filed in the preceding _______ years.

A ________ interest rate fluctuates throughout the life of the loan according to the interest rate that the lender would pay if it borrowed the funds in order to relend them.

A bank's ________ rate is the lowest published rate of interest at which the bank lends to its best and most creditworthy commercial customers.

While state restrictions may apply,there are no federal restrictions on lenders and borrowers entering into transactions whereby secured credit will be sued to acquire stock.

Which of the following makes a security interest created under Article 9 a floating lien?

Agreements for term or revolving loans may call for mandatory prepayment when certain events occur.

In a(n)________ loan,more than one lender enters into concurrent direct obligations with the borrower to make the loan.

An equipment lease that serves the purpose of financing is known as a(n)________ lease.

A provision in a loan agreement that the borrower cannot incur additional debt beyond a certain amount is an example of a(n)_______ covenant.

With a(n)_______ guaranty,subsidiaries guarantee,or pledge their assets as security for,the parent's debt.

law, value creation, and risk management

Ethics ant the law

Courts, sources of law, and dispute resolution

Constitutional bases for business regulation

Agency

Administrative Law

Contracts

sales,licensing,and e-commerce

Torts and Privacy protection

product liability

Intellectual property

The employment agreement

civil rights and employment discrimination

Criminal law

Environmental law

Antitrust

Consumer Protection

real property and land use

Forms of business organizations

Directors, Officers, and Controlling Shareholders

Public and Private Offerings of Securities

Securities Fraud and insider trading

International Business

Filters

A Chapter 7 discharge is not available to a debtor who has received a discharge in a bankruptcy filed in the preceding _ years or in a Chapter 13 case filed in the preceding _ years.