Exam 13: Negotiable Instruments, Credit, and Bankruptcy

To be found a holder in due course, a transferee must:

Under Chapter 13, which kind of debt is subject to a different repayment schedule?

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

Chapter 13 bankruptcy proceedings are used mainly by businesses.

One of the most common defenses a surety may raise is that material changes were made to the debt contract, thus releasing the surety.

The ____ of a note is the party who promises to pay another party.

More than one million people file for bankruptcy each year.

Trade associations may provide information about the credit experience of their members.

A negotiable instrument may be transferred in two basic ways. If the instrument is made "to the order" of the payee, the payee must (1) endorse the instrument and (2) deliver the instrument to a third party. If the instrument is made "to bearer," the party in possession of the instrument is required only to deliver it to transfer it.

To transfer an instrument made "to the order" of the payee, the payee must:

Once issued, a negotiable instrument can be transferred by assignment or by negotiation to another party.

In Fordyce Bank and Trust v. Bean Timberland, the bank lent Bean money to buy timber from landowners. Bean gave the bank security interests in the timber, which he sold to lumber companies that milled the logs into lumber. When Bean defaulted on the loan, the bank tried to collect from the lumber companies because it had a secured interest in the timber. The courts held that:

If a negotiable instrument is ____, the assignee has the same contract rights and responsibilities as the assign-or.

Every year ____ businesses file for bankruptcy.

In Chapter 13 bankruptcy, there is a confirmation plan worked out by the trustee.

Only debtors may obtain liens.

Credit terms must specify which of the following:

A garnishment is when a creditor gets the right to attach a certain percentage of a debtor's wages.

If a negotiable instrument is ____, the transferee takes the instrument free of any of the transferor's contract obligations.

Refer to Fact Pattern 12-1. Suppose that Gena pledges her 1/2 acre piece of property to secure her loan with First Fidelity. After Gena defaults on her loan, First Fidelity may obtain: