Question 1

The final stage of bankruptcy is known as:

Accepted Answer

A)  disruption in bankruptcy 
B)  removal in bankruptcy 
C)  distancing of the debtor 
D)  divorce from the proceedings 
E)  none of the other choices 
A)  disruption in bankruptcy 
B)  removal in bankruptcy 
C)  distancing of the debtor 
D)  divorce from the proceedings 
E)  none of the other choices

Question 2

An attached interest means:

Accepted Answer

A)  the customer has transferable rights in the collateral 
B)  the customer signed the debt instrument 
C)  only the customer provides the value 
D)  the customer has transferable rights in the collateral and has signed the debt instrument 
E)  the customer has transferable rights in the collateral and has signed the debt instrument and provides value 
A)  the customer has transferable rights in the collateral 
B)  the customer signed the debt instrument 
C)  only the customer provides the value 
D)  the customer has transferable rights in the collateral and has signed the debt instrument 
E)  the customer has transferable rights in the collateral and has signed the debt instrument and provides value

Question 3

When a business lends another business money, it should perfect its security interest by:

Accepted Answer

A)  applying to the IRS for security 
B)  publish a notice in the Federal Register 
C)  preparing its inventory for satisfaction 
D)  obtaining a late-term guarantor 
E)  none of the other choices 
A)  applying to the IRS for security 
B)  publish a notice in the Federal Register 
C)  preparing its inventory for satisfaction 
D)  obtaining a late-term guarantor 
E)  none of the other choices

Question 4

The trustee in bankruptcy:

Accepted Answer

A)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy 
B)  administers the debtor's estate 
C)  attempts to improve the status of the general creditors 
D)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy and administers the debtor's estate 
E)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy and administers the debtor's estate and attempts to improve the status of general creditors 
A)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy 
B)  administers the debtor's estate 
C)  attempts to improve the status of the general creditors 
D)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy and administers the debtor's estate 
E)  takes possession of and liquidates the debtor's exempt property upon the debtor's declaration of bankruptcy and administers the debtor's estate and attempts to improve the status of general creditors

Question 5

According to the UCC, a creditor may repossess a product in which it has a security interest:

Accepted Answer

A)  without judicial process 
B)  with a property warrant 
C)  so long as this doesn't cause a breach of peace 
D)  without judicial process but with a property warrant 
E)  without judicial process so long as it does not cause a breach of peace 
A)  without judicial process 
B)  with a property warrant 
C)  so long as this doesn't cause a breach of peace 
D)  without judicial process but with a property warrant 
E)  without judicial process so long as it does not cause a breach of peace

Question 6

An acknowledgment by a bank that it has received money from a customer with a promise by the bank that it will repay the money received at a specified date is a certificate of deposit.

Accepted Answer

A) True 
 B)False

Question 7

A "draft drawn on a bank and payable on demand" is a:

Accepted Answer

A)  promissory note 
B)  note 
C)  certificate of deposit 
D)  deposit slip 
E)  none of the other choices are correct 
A)  promissory note 
B)  note 
C)  certificate of deposit 
D)  deposit slip 
E)  none of the other choices are correct

Question 8

Most security interests are perfected when filed for public inspection with the secretary of state, county clerk, or similar official.

Accepted Answer

A) True 
 B)False

Question 9

____ are drafts that mature on the payment date set in the future.

Accepted Answer

A)  Time or term drafts 
B)  Delayed drafts 
C)  Lapsed drafts 
D)  Real estate drafts 
E)  none of the other choices are correct 
A)  Time or term drafts 
B)  Delayed drafts 
C)  Lapsed drafts 
D)  Real estate drafts 
E)  none of the other choices are correct

Question 10

General economic conditions at the time a loan is made will be taken into account in setting credit standards.

Accepted Answer

A) True 
 B)False

Question 11

The party to receive a payment from a negotiable instrument is called the payee.

Accepted Answer

A) True 
 B)False

Question 12

Consumer credit accounts are often installment accounts.

Accepted Answer

A) True 
 B)False

Question 13

Payment practices vary around the world. Islamic law is interpreted by many Muslims to mean that interest payments are prohibited by the Koran. In practice, this means that in countries that practice Islamic law:

Accepted Answer

A)  there is no borrowing or lending 
B)  all borrowing is done at zero interest rate 
C)  borrowing is done by lending arrangements that pay the equivalent of interest 
D)  interest payments must be donated to religious organizations 
E)  none of the other choices 
A)  there is no borrowing or lending 
B)  all borrowing is done at zero interest rate 
C)  borrowing is done by lending arrangements that pay the equivalent of interest 
D)  interest payments must be donated to religious organizations 
E)  none of the other choices

Question 14

A(n) ____ has the same contract responsibilities as an assignee under a nonnegotiable instrument.

Accepted Answer

A)  holder in due course 
B)  ordinary holder 
C)  regular holder 
D)  nonnegotiable holder 
E)  temporary holder 
A)  holder in due course 
B)  ordinary holder 
C)  regular holder 
D)  nonnegotiable holder 
E)  temporary holder

Question 15

When the party that furnished material, labor, or services for the construction or repair of a building or other real property places a lien on the property for unpaid bills it is called a(n):

Accepted Answer

A)  mechanic's lien 
B)  artisan's lien 
C)  real lien 
D)  due process lien 
E)  possessory lien 
A)  mechanic's lien 
B)  artisan's lien 
C)  real lien 
D)  due process lien 
E)  possessory lien

Question 16

Even though a person is declared bankrupt, he or she will still have to pay child support, if they have a legal obligation to do so.

Accepted Answer

A) True 
 B)False

Question 17

If a debtor cannot meet credit obligations it is said:

Accepted Answer

A)  to relapse 
B)  to expire 
C)  to perfect its claim 
D)  to attach a lien 
E)  none of the other choices 
A)  to relapse 
B)  to expire 
C)  to perfect its claim 
D)  to attach a lien 
E)  none of the other choices

Question 18

Under Article 3 of the UCC, a check is:

Accepted Answer

A)  an unconditional written order to pay that involves three parties: a drawer, drawee, payee; the drawee may be a bank, person, or business. Payment may be set at some future time 
B)  a draft drawn on a bank and payable on demand 
C)  a promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at some future date 
D)  an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received either at a specified date or upon demand; two parties are involved: a maker and a payee 
E)  none of these 
A)  an unconditional written order to pay that involves three parties: a drawer, drawee, payee; the drawee may be a bank, person, or business. Payment may be set at some future time 
B)  a draft drawn on a bank and payable on demand 
C)  a promise by one party to pay a certain sum of money to another party; two parties are involved: the maker and the payee; payment may be set at some future date 
D)  an acknowledgment by a bank that it has received money from a customer with a promise from the bank that it will repay the money received either at a specified date or upon demand; two parties are involved: a maker and a payee 
E)  none of these

Question 19

In Fordyce Bank v. Bean Timberland, where the bank had a security interest in proceeds from the sale of timber by Bean, the court held that the buyers of timber were liable for not ensuring payment went to the bank instead of to Bean.

Accepted Answer

A) True 
 B)False

Question 20

In General Electric Business Financial Services v. Silverman, where Silverman failed to repay a loan from GE Financial after his company went bankrupt, despite having signed a guarantee to repay the loan even if the company went bankrupt, the district court:

Accepted Answer

A)  dismissed the case due to improper filing of court documents 
B)  did not grant the plaintiff's movement for summary judgment because the Illinois Credit Agreement Act bars affirmative defenses that rely on oral promises that contradict the written terms of the agreement 
C)  did not grant plaintiff's movement for summary judgment because the Illinois Credit Agreement Act allows affirmative defenses that rely on oral promises that contradict the written terms of the agreement 
D)  dismissed the case for lack of written evidence of an existing contract 
E)  none of the other choices are correct 
A)  dismissed the case due to improper filing of court documents 
B)  did not grant the plaintiff's movement for summary judgment because the Illinois Credit Agreement Act bars affirmative defenses that rely on oral promises that contradict the written terms of the agreement 
C)  did not grant plaintiff's movement for summary judgment because the Illinois Credit Agreement Act allows affirmative defenses that rely on oral promises that contradict the written terms of the agreement 
D)  dismissed the case for lack of written evidence of an existing contract 
E)  none of the other choices are correct

Exam 13: Negotiable Instruments, Credit, and Bankruptcy

The final stage of bankruptcy is known as:

An attached interest means:

When a business lends another business money, it should perfect its security interest by:

The trustee in bankruptcy:

According to the UCC, a creditor may repossess a product in which it has a security interest:

An acknowledgment by a bank that it has received money from a customer with a promise by the bank that it will repay the money received at a specified date is a certificate of deposit.

A "draft drawn on a bank and payable on demand" is a:

Most security interests are perfected when filed for public inspection with the secretary of state, county clerk, or similar official.

____ are drafts that mature on the payment date set in the future.

General economic conditions at the time a loan is made will be taken into account in setting credit standards.

The party to receive a payment from a negotiable instrument is called the payee.

Consumer credit accounts are often installment accounts.

Payment practices vary around the world. Islamic law is interpreted by many Muslims to mean that interest payments are prohibited by the Koran. In practice, this means that in countries that practice Islamic law:

A(n) ____ has the same contract responsibilities as an assignee under a nonnegotiable instrument.

When the party that furnished material, labor, or services for the construction or repair of a building or other real property places a lien on the property for unpaid bills it is called a(n):

Even though a person is declared bankrupt, he or she will still have to pay child support, if they have a legal obligation to do so.

If a debtor cannot meet credit obligations it is said:

Under Article 3 of the UCC, a check is:

In Fordyce Bank v. Bean Timberland, where the bank had a security interest in proceeds from the sale of timber by Bean, the court held that the buyers of timber were liable for not ensuring payment went to the bank instead of to Bean.

In General Electric Business Financial Services v. Silverman, where Silverman failed to repay a loan from GE Financial after his company went bankrupt, despite having signed a guarantee to repay the loan even if the company went bankrupt, the district court:

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