Question 1

National banks acting as lenders are subject to state usury laws.

Accepted Answer

A) True 
 B)False

Question 2

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?

Accepted Answer

A)  All funds are added together and disbursed to the claimants based upon the percentage of each creditor's claim. 
B)  Tina has first priority, the credit card companies are then paid, and XYZ Bank is entitled to any remainder. 
C)  XYZ Bank receives $200,000 from the sale of the home, Sue receives $3,000, and the remainder is divided between the credit card companies and Tina. 
D)  Tina has first priority, XYZ Bank is then paid, and the credit card companies divide the remainder.

Question 3

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

Accepted Answer

A)  interest 
B)  usury 
C)  rate 
D)  term

Question 4

A revolving loan is based upon the continuous extension of credit of an unlimited amount.

Accepted Answer

A) True 
 B)False

Question 5

What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?

Accepted Answer

The answer of What is required in a filing for...

Question 6

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?

Accepted Answer

The answer of What is a preference under the bankruptcy...

Question 7

Several commentators have criticized the Bankruptcy Code as too easily excusing individuals and businesses from honoring their lawful obligations.From a societal standpoint,do you believe that the Bankruptcy Code plays a positive role in social and economic relationships? What changes,if any,would you recommend?

Accepted Answer

The answer of Several commentators have criticized the Bankruptcy Code...

Question 8

The UCC provides that,unless otherwise agreed,a security agreement gives the secured party a security interest in the proceeds if collateral is sold,exchanged,collected,or otherwise disposed of.

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Define the terms security interest,dragnet clause,and perfection.What are the methods of perfecting a security interest?

Accepted Answer

The answer of Define the terms security interest,dragnet clause,and perfection.What...

Question 11

A creditor's claim in bankruptcy may be involuntarily postponed through application of the doctrine of equitable subordination.

Accepted Answer

A) True 
 B)False

Question 12

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?

Accepted Answer

A)  Yes, because Sylvia, as a guarantor, has no rights to oppose any action of the bank. 
B)  Yes, because while Sylvia has certain rights in regard to actions taken by the bank, she had no right to oppose the provision of a grace period since it is unlikely that allowing such a grace period would impair Sylvia's interests. 
C)  No, because Alice should have obtained the written consent of Sylvia in the form of an affirmation of the guaranty in view of the grace period. 
D)  No, because as a matter of equitable business practice, Alice should have put Sylvia on notice although Alice did not increase the bank's exposure by failing to do so.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A commitment fee is an amount a lender requires as consideration for its promise to keep a commitment to loan available.

Accepted Answer

A) True 
 B)False

Question 15

A debtor does not have to show it is insolvent to file for bankruptcy.

Accepted Answer

A) True 
 B)False

Question 16

Payments in the ordinary course of business made within 90 days prior to a Chapter 11 bankruptcy filing are voidable as a preference.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is false regarding methods of perfection?

Accepted Answer

A)  A security interest in a deposit account may be perfected only by taking control of the collateral. 
B)  A security interest in a letter-of-credit right may be perfected only by taking control of the collateral. 
C)  A security interest in money may be perfected either through possession or through filing a financing statement. 
D)  For a limited period, a purchase-money security interest in consumer goods is automatically perfected.

Question 18

Which of the following was the result before the U.S.Supreme Court in Stern v.Marshall,the case in the text involving whether a counterclaim for tortuous interference with an expected gift,filed in response to a bankruptcy claim for defamation,was a core matter subject to the jurisdiction of the bankruptcy court; and,if so,whether conferring that authority on the bankruptcy court violated Article III of the U.S.Constitution?

Accepted Answer

A)  The Court ruled that the tortuous interference counterclaim was a core proceeding but that the bankruptcy court lacked the constitutional authority to enter a final judgment on the claim. 
B)  The Court ruled that the tortuous interference counterclaim was a core proceeding and that the bankruptcy court had the constitutional authority to enter a final judgment on the claim. 
C)  The Court ruled that the tortuous interference counterclaim was not a core proceeding and that the bankruptcy court lacked the constitutional authority to enter a final judgment on the claim. 
D)  The Court ruled that the tortuous interference counterclaim was a core proceeding in part and that the bankruptcy court had the constitutional authority to enter a final judgment on portions of the claim.

Question 19

A(n)________ guaranty is enforceable only with respect to a specified transaction or series of transactions.

Accepted Answer

A)  attached 
B)  upstream 
C)  restricted 
D)  payment

Question 20

In order to reflect the greater risk to the lender,secured loans are priced at a higher rate than unsecured loans.

Accepted Answer

A) True 
 B)False

Exam 23: Debtor-Creditor Relations and Bankruptcy

National banks acting as lenders are subject to state usury laws.

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

A revolving loan is based upon the continuous extension of credit of an unlimited amount.

What is required in a filing for a voluntary petition in bankruptcy? An involuntary petition?

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?

The UCC provides that,unless otherwise agreed,a security agreement gives the secured party a security interest in the proceeds if collateral is sold,exchanged,collected,or otherwise disposed of.

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.

Define the terms security interest,dragnet clause,and perfection.What are the methods of perfecting a security interest?

A creditor's claim in bankruptcy may be involuntarily postponed through application of the doctrine of equitable subordination.

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

A commitment fee is an amount a lender requires as consideration for its promise to keep a commitment to loan available.

A debtor does not have to show it is insolvent to file for bankruptcy.

Payments in the ordinary course of business made within 90 days prior to a Chapter 11 bankruptcy filing are voidable as a preference.

Which of the following is false regarding methods of perfection?

A(n) ________ guaranty is enforceable only with respect to a specified transaction or series of transactions.

In order to reflect the greater risk to the lender,secured loans are priced at a higher rate than unsecured loans.