Question 1

Peggy's credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income,from sporadic free-lance jobs,has dropped.Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets.

Accepted Answer

A) True 
 B)False  False

Question 2

Pamela plans to file for bankruptcy under Chapter 7.One month before filing,Pamela gives Marshall's Filling Station $500 to apply to her gas bill,since Marshall has been so kind to let her charge the gas she needed for her car over the past year.The bankruptcy trustee:

Accepted Answer

A)   can cancel the payment to Marshall as a fraudulent transfer.
B)   cannot cancel the payment to Marshall because it is payment for an existing debt.
C)   cannot cancel the payment to Marshall because he is not an insider.
D)   can cancel the payment to Marshall as a voidable preference. D

Question 3

All but which of the following is true? Once confirmed,a Chapter 13 bankruptcy plan:

Accepted Answer

A)   is binding on all creditors, whether they like it or not.
B)   washes the debtor clean of all pre-petition debts except those provided for in the plan.
C)   permanently discharges the debts provided for in the plan.
D)   may be modified upon the request of the debtor, the trustee, or unsecured creditors if the debtor's circumstances change. C

Question 4

Country Bank,located in Indiana,loaned Chmelik $5,000 and obtained a security interest in a copyright Chmelik owns.Chmelik lives in Illinois,but works in Indiana.In order to perfect its interest,Country Bank files a financing statement in Indiana.The financing statement provides Chmelik's correct name,his business address,and a reasonable description of the copyright used as collateral.Is the financing statement sufficient?

Accepted Answer

A)   Yes, it meets the UCC requirements for contents and filing.
B)   No, if the debtor is an individual, the secured party generally must file in the state of the debtor's principal residence, which in this case would be Illinois.
C)   No, the contents of the financing statement are incomplete.
D)   Both (b)  and (c)  are correct.

Question 5

Olympia Landscaping Co.has filed for voluntary bankruptcy under Chapter 7.Which of the following property will be exempt from the bankruptcy process under federal exemptions?

Accepted Answer

A)   Work tools.
B)   Up to three company cars.
C)   Up to $20,200 of the value of the company's real property.
D)   All of the above.
E)   None of the above.

Question 6

February 5,Panda Gardens puts up its Chinese cookie inventory as well as any future inventory as collateral for a loan from Fortune Bank.Fortune Bank perfects by filing a financing statement the same day.June 10,Panda Gardens buys unstuffed fortune cookies from Olga under a purchase money security interest.Olga notifies Fortune Bank of her PMSI and perfects the PMSI by filing a financing statement before Panda Gardens takes possession of the unstuffed cookies.Panda Gardens,failing to predict hard times,filed for bankruptcy.As between Fortune Bank and Olga,who has the superior interest in the unstuffed fortune cookies purchased on June 10?

Accepted Answer

A)   Fortune Bank. The first to file has the priority interest in the inventory.
B)   Olga, in this situation. Her PMSI in inventory has met the conditions in order to take priority over a conflicting perfected security interest.
C)   Olga and Fortune Bank share proportionately the priority interest in the inventory.
D)   Neither Olga nor Fortune have a priority interest. The employees and the IRS have superior claims.

Question 7

Which of the following is an example of a purchase money security interest in consumer goods?

Accepted Answer

A)   A doctor purchasing a computer on credit to create a Webpage to make services and information available to her patients.
B)   A doctor purchasing on credit a blood glucose monitor to check his own blood sugar levels.
C)   A doctor purchasing a TV/VCR unit on credit to place in her office waiting room.
D)   A doctor purchasing an exercise bike for his employees to use over the lunch hour.

Question 8

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

Accepted Answer

A)   file a financing statement.
B)   take possession of the instrument.
C)   do nothing. Perfection is automatic.
D)   secure a court order.

Question 9

Which of the following is a requirement for an involuntary Chapter 7 bankruptcy petition?

Accepted Answer

A)   The debtor must owe at least $150,000 in unsecured claims to the creditors who file.
B)   The debtor must have at least three creditors join in the petition if the debtor has 12 or more creditors. If the debtor has fewer than 12 creditors, any single creditor or group can file a petition.
C)   The creditors must have tried to help the debtor overcome the financial difficulties.
D)   The debtor must have a majority of the creditors file the petition.

Question 10

Ramona has received a discharge in bankruptcy,but wants to reaffirm a debt to her sister.To be valid,the reaffirmation:

Accepted Answer

A)   will be scrutinized by the court to make sure her sister has not unfairly pressured Ramona.
B)   will be automatically disallowed because allowing Ramona to promise to pay a discharged debt would be contrary to the goals of the bankruptcy proceedings.
C)   will be automatically allowed if Ramona voluntarily chooses to make it.
D)   must clearly disclose that Ramona has the right to rescind at any time since the debt was already discharged.

Question 11

The correct order of payment of claims from the debtor's estate would be:

Accepted Answer

A)   secured claims, priority claims, unsecured claims.
B)   secured claims, unsecured claims, priority claims.
C)   priority claims, secured claims, unsecured claims.
D)   priority claims, unsecured claims, secured claims.

Question 12

A security agreement must be in writing.

Accepted Answer

A) True 
 B)False

Question 13

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

Accepted Answer

A)   Despite the agreement, Mowers Plus could not create a security interest in the mower since it is a consumer good.
B)   Mowers Plus has had attachment of a security interest in Amy's mower.
C)   Mowers Plus completed the attachment of a security interest in the mower when it filed the financing statement on May 1.
D)   The security interest has not attached, but attachment is unimportant to enforceability of a security interest.

Question 14

Great State Bank took a security interest in Gresham,Inc.'s meat processing equipment.Gresham defaulted on the loan.Which statement is correct?

Accepted Answer

A)   Great State Bank may take possession of the collateral.
B)   Great State Bank may ignore its rights in the collateral and sue Gresham for the money owed.
C)   Both (a)  and (b)  are courses of action that Great State Bank may follow.
D)   Neither (a)  nor (b)  are courses of action that Great State Bank may follow.

Question 15

Debts that cannot be discharged in bankruptcy,include all EXCEPT

Accepted Answer

A)   alimony.
B)   income taxes.
C)   negligence judgments.
D)   fraud judgments.

Question 16

Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.

Accepted Answer

The answer of Fowler Bros.has applied to Gibralter Bank for...

Question 17

Macig enters into a secured consumer debt transaction with Friendly Bank.When Macig pays the loan in full,Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements is incorrect?

Accepted Answer

A)   The debtor and obligor in a secured transaction may be different persons.
B)   A corporation may electronically authenticate a loan agreement by using the Internet to transmit a public-key signature.
C)   Attachment is a series of steps the secured party must complete to protect its rights in collateral against people other than the debtor.
D)   The UCC distinguishes software from goods.

Question 19

Brad was having financial difficulties and thought bankruptcy might be in his future.He transferred his sports car to his brother with the agreement that if he didn't file for bankruptcy within the next 18 months,his brother would return the car to him.Brad did file for bankruptcy in ten months.The bankruptcy trustee can bring the car back into Brad's estate for the purpose of providing assets for Brad's creditors.

Accepted Answer

A) True 
 B)False

Question 20

Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new van for deliveries from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.

Accepted Answer

A) True 
 B)False

Exam 14: Secured Transactions and Bankruptcy

Peggy's credit card debts are mounting as her costs of insurance and fuel have dramatically increased and her income,from sporadic free-lance jobs,has dropped.Chapter 13 of the Bankruptcy Code will allow her to reorganize her debt while she keeps most of her assets.

Pamela plans to file for bankruptcy under Chapter 7.One month before filing,Pamela gives Marshall's Filling Station $500 to apply to her gas bill,since Marshall has been so kind to let her charge the gas she needed for her car over the past year.The bankruptcy trustee:

All but which of the following is true? Once confirmed,a Chapter 13 bankruptcy plan:

Olympia Landscaping Co.has filed for voluntary bankruptcy under Chapter 7.Which of the following property will be exempt from the bankruptcy process under federal exemptions?

Which of the following is an example of a purchase money security interest in consumer goods?

To perfect a security interest in a negotiable instrument,Second State Savings and Loan should:

Which of the following is a requirement for an involuntary Chapter 7 bankruptcy petition?

Ramona has received a discharge in bankruptcy,but wants to reaffirm a debt to her sister.To be valid,the reaffirmation:

The correct order of payment of claims from the debtor's estate would be:

A security agreement must be in writing.

On April 10,Amy agreed to buy a riding lawn mower from Mowers Plus,signing a promissory note and security agreement giving Mowers Plus a security interest in the mower.On April 15,Amy took delivery of the mower.On May 1,Mowers Plus filed a financing statement.Which of the following is correct?

Great State Bank took a security interest in Gresham,Inc.'s meat processing equipment.Gresham defaulted on the loan.Which statement is correct?

Debts that cannot be discharged in bankruptcy,include all EXCEPT

Fowler Bros.has applied to Gibralter Bank for a $50,000 loan for its business expansion.If Fowler Bros.plans to use its account at Gibralter Bank as collateral,discuss what the bank needs to do for a security interest to attach.

Macig enters into a secured consumer debt transaction with Friendly Bank.When Macig pays the loan in full,Friendly Bank is required to file a statement indicating that it no longer claims a secured interest in the collateral.

Which of the following statements is incorrect?

Spicy & Hot,Inc.is interested in expanding its Mexican food restaurant into a Mexican food catering business.Spicy & Hot,Inc.buys a new van for deliveries from Van World.Spicy & Hot,Inc.is a buyer in the ordinary course of business when purchasing the van.