Exam 23: Debtor-Creditor Relations and Bankruptcy.

Under a guaranty of collection,the guarantor becomes obliged to pay only after the lender has attempted unsuccessfully to collect the amount due from the primary debtor.

Bank president Spencer had approved significant loan amounts to Bob for the purpose of developing a shopping center.Spencer was satisfied that the land collateralizing the shopping center loan was sufficient,and Spencer was not particularly concerned about that loan.Bob,however,requested an additional loan for the purpose of starting a temporary employee agency.Bob offered to collateralize that loan with his office equipment,but Spencer was uneasy that such collateral was insufficient.If Spencer decides to go forward with the loan involving the temporary employee agency,which of the following is true regarding his options?

A purchase money security interest in consumer goods is an automatically perfected security interest.

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.

If the collateral from one loan is used to secure the obligations on another loan,this is called __________,or sometimes called a "__________" clause.

A(n)__________ clause in a loan document provides that any breach by the borrower under any other loan agreement constitutes an event of default.

A guaranty that covers all future obligations of the primary debtor to a lender is referred to as a __________ guaranty.

Which of the following expresses the effect of the D'Oench,Duhme doctrine in relation to federally insured banks?

Congress is given the power to enact bankruptcy laws by:

The debtor-in-possession must honor all prebankruptcy executory contracts.

Interest is generally computed on a __________ basis.

If a borrower fails to repay a secured loan,the lender may foreclose on the collateral.

What is a preference under the bankruptcy code? What time period is reviewed to determine if a preference has occurred? When does a long-term debt payment to a bank qualify under the ordinary course of business exception?

Alice,the president of ABC Bank,had a meeting with Fred to discuss the fact that he was having difficulty making the payments on his loan that was guaranteed by Sylvia.Fred requested that Alice provide a grace period to Fred and allow him to miss a few payments without penalty in order to catch up his finances.Alice had no objection.Assuming the guaranty agreement did not address such situations,is Alice acting prudently and why or why not?

Bob goes bankrupt.He has several creditors and a small amount in savings.He owes XYZ Bank $200,000 for which he used his home as collateral.XYZ Bank properly perfected its interest in the home.Bob additionally owes $3,000 in alimony to an ex-wife,Sue; $50,000 in unsecured credit card bills; and $5,000 in unsecured debt to his friend Tina.After all exemptions are satisfied,$205,000 from the sale of the home and $5,000 in a small bank account remain for distribution to creditors.Which of the following is true regarding priority?

__________ a security interest involves making it valid as against other creditors of the debtor.

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 state law that limits the maximum rate of interest that may be charged is called a(n)__________ law.

In CASE 23.1Tufankujian v.Rockland Trust Co.(2003)Tufankujian signed a contract to acquire a Toyota dealership for $1.4 million.Rockland agreed to lend Tufankujian $700,000 at 7.5% interest,with the remaining $700,000 to come from the SBA at a separate interest rate which was quoted by Rockland at 6.5% (but with no written guaranty).Ultimately,the loan was not consummated and Tufankujian sued.How did the court rule?

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.