Exam 15: Priority of Creditors

Owen had borrowed money from a credit union to purchase a car, and the credit union had required a security interest against the car, which they registered under the Personal Property Security Act. As well, Owen's father guaranteed the loan. Some months later, Owen decided to go back to school, and he had to sell the car to do so. He returned to the credit union and, at his request, the credit union gave up the security they had against the vehicle, knowing that they still had the loan guaranteed by Owen's father. Explain the wisdom of this move.

With regard to bankruptcy and debt collection, which of the following is false?

Student loans survive bankruptcy and remain payable for up to seven years after the debtor ceases to be a student.

With regard to guarantees and indemnities, which of the following is false?

In the event of a default, if the creditor elects to repossess and resell the goods, how does he protect his right to claim for deficit?

As long as the debtor lives up to the terms of an accepted consumer proposal, creditors cannot take action against him/her.

When a supplier of goods such as a wholesaler transfers those goods to a debtor, who then goes bankrupt, explain the supplier's legal position.

What is the effect if a debtor fraudulently transfers property to a bona fide purchaser for value?

In case of default by either the creditor or debtor, breach of contract remedies apply.

What is the primary remedy available when goods have been used to secure a loan which has been defaulted?

A guarantee must be supported by consideration, just like any other contractual obligation. Explain what consideration is present when one person guarantees the debt of another.

Elizabeth gave a guarantee to the Bank in support of a loan to Tomasz. Over the next few years, the Bank and Tomasz made a number of alterations to the loan agreement. The effect of these changes was to significantly increase the amount owing to the Bank. Elizabeth had no notice or knowledge of these changes, nor did she consent to any such changes. What is the likely result?

Bankruptcy is a wholly voluntary process designed primarily to protect debtors from abusive creditors.

With few exceptions, once a bankrupt is discharged, there is no longer an obligation to pay back the unsecured creditors.

"The main purpose of security is to provide some recourse to the person claiming to be paid if some dispute arises about the quality of the performance of the contract." Discuss the accuracy of this statement.

Attachment takes place when

Explain what constitutes a bulk sale and how they are controlled in some jurisdictions.

The owner of the house had contracted with a general contractor, Mr. Hadrian, for a greenhouse addition to the house at a cost of $20,000. In accordance with legislation, the owner withheld 10% and waited the legislated period of time within which any liens were to be filed. Which of the following correctly describes the owner's liability?

If a fraudulent transfer is made to a bona fide purchaser for value, the transaction can still be reversed for a period of one year.

A company named Printers World Ltd. bought a $9000 plotter secured by a Security Agreement and, because of business reverses, is unable to make the payments. Which of the following is accurate with respect to the legal position of the parties?