Question 1

Norma files a petition in bankruptcy. She turns her assets over to O'Brien, who sells them and then distributes the proceeds to Norma's creditors. O'Brien is

Accepted Answer

A) a preferred creditor. 
B) a bankruptcy court judge. 
C) a bankruptcy trustee. 
D) a debtor.

Question 2

Purchase-money security interests in consumer goods are perfected by filing a financing statement.

Accepted Answer

A) True 
 B)False

Question 3

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of

Accepted Answer

A) five days. 
B) five months. 
C) five weeks. 
D) five years.

Question 4

When more than one party claims an interest in the same collateral, a perfected secured party's interest has priority over security interests that are perfected later.

Accepted Answer

A) True 
 B)False

Question 5

Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible, he asks the court to enter a prejudgment order to seize Sasha's property. This is a request for

Accepted Answer

A) a contract of suretyship. 
B) an order that would violate most state laws. 
C) a writ of attachment. 
D) an order of receivership.

Question 6

A court can dismiss a debtor's petition for a Chapter 13 adjustment if the circumstances indicate bad faith.

Accepted Answer

A) True 
 B)False

Question 7

A preference occurs when a debtor transfers property or money favoring one creditor over others.

Accepted Answer

A) True 
 B)False

Question 8

On the entry of an order for relief in a reorganization case, the creditors generally take over the operation of the debtor's business.

Accepted Answer

A) True 
 B)False

Question 9

Lena borrows from Mac and Nicol, using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is

Accepted Answer

A) Lena. 
B) Mac and Nicol, in proportion to Lena's debt to each. 
C) Mac only. 
D) Nicol only.

Question 10

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine, which Petra still possesses at her repair shop. Petra's lien on the machine will terminate

Accepted Answer

A) if Petra continues to maintain possession. 
B) if Petra does not file a written notice of lien within thirty days. 
C) if Petra voluntarily surrenders possession. 
D) within thirty days.

Question 11

A defaulting debtor cannot redeem nonexempt property before a sale under a writ of execution.

Accepted Answer

A) True 
 B)False

Question 12

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation. Between these interests, the first to be filed or perfected has priority over other filed or perfected security interests in

Accepted Answer

A) general, subject to exceptions. 
B) no circumstances. 
C) states that have not adopted Article 9 of the UCC. 
D) states that require a security agreement to be signed and dated by the creditor.

Question 13

A homestead exemption allows a debtor to subtract the value of the family home from the amount of a debt.

Accepted Answer

A) True 
 B)False

Question 14

Debit & Credit Financing, Inc., and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation. Priority between these security interests is generally determined by

Accepted Answer

A) the amount of the claim. 
B) the custom in the trade. 
C) the time of perfection or attachment. 
D) the "float" of the liens.

Question 15

Creditors Loan Company and Debtors Service Corporation-Ellen's creditors-contract with Ellen for the discharge of her liquidated debts on payment of a lesser sum. This is

Accepted Answer

A) a composition agreement. 
B) a subrogation. 
C) a suretyship agreement. 
D) in violation of most states' laws.

Question 16

In a repayment plan case, the plan must provide for payment of all claims in full, whether or not they are entitled to priority.

Accepted Answer

A) True 
 B)False

Question 17

A surety is primarily liable for the debt of a principal.

Accepted Answer

A) True 
 B)False

Question 18

A security interest is enforceable only if the debtor has rights in the collateral.

Accepted Answer

A) True 
 B)False

Question 19

All debts are dischargeable in bankruptcy.

Accepted Answer

A) True 
 B)False

Question 20

A purchase-money security interest in consumer goods is created when a person buys goods on credit.

Accepted Answer

A) True 
 B)False

Exam 16: Creditors Rights and Bankruptcy

Norma files a petition in bankruptcy. She turns her assets over to O'Brien, who sells them and then distributes the proceeds to Norma's creditors. O'Brien is

Purchase-money security interests in consumer goods are perfected by filing a financing statement.

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of

When more than one party claims an interest in the same collateral, a perfected secured party's interest has priority over security interests that are perfected later.

Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible, he asks the court to enter a prejudgment order to seize Sasha's property. This is a request for

A court can dismiss a debtor's petition for a Chapter 13 adjustment if the circumstances indicate bad faith.

A preference occurs when a debtor transfers property or money favoring one creditor over others.

On the entry of an order for relief in a reorganization case, the creditors generally take over the operation of the debtor's business.

Lena borrows from Mac and Nicol, using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is

Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine, which Petra still possesses at her repair shop. Petra's lien on the machine will terminate

A defaulting debtor cannot redeem nonexempt property before a sale under a writ of execution.

Natural Resource Investment Company and Mega Bank are secured parties with security interests in property owned by LNG Gas Corporation. Between these interests, the first to be filed or perfected has priority over other filed or perfected security interests in

A homestead exemption allows a debtor to subtract the value of the family home from the amount of a debt.

Debit & Credit Financing, Inc., and Equity Lending Company are secured parties with security interests in property owned by Fleet Shipping Corporation. Priority between these security interests is generally determined by

Creditors Loan Company and Debtors Service Corporation-Ellen's creditors-contract with Ellen for the discharge of her liquidated debts on payment of a lesser sum. This is

In a repayment plan case, the plan must provide for payment of all claims in full, whether or not they are entitled to priority.

A surety is primarily liable for the debt of a principal.

A security interest is enforceable only if the debtor has rights in the collateral.

All debts are dischargeable in bankruptcy.

A purchase-money security interest in consumer goods is created when a person buys goods on credit.