Question 1

Market Credit Corporation is the secured party in a secured transaction with Northwest Outfitters. Market Credit could also be referred to as

Accepted Answer

A) the debtor. 
B) the secured creditor. 
C) the security interest. 
D) the filing officer.

Question 2

Advances against lines of credit can be subject to a perfected security interest in certain collateral.

Accepted Answer

A) True 
 B)False

Question 3

A creditor's surrender of collateral to a debtor without the guarantor's consent can reduce the guarantor's obligation.

Accepted Answer

A) True 
 B)False

Question 4

If a debtor does not pay a mechanic's lien, the debtor's property can be sold to satisfy the debt.

Accepted Answer

A) True 
 B)False

Question 5

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

Accepted Answer

A)  ​not sufficient because it is too specific. 
B)  ​not sufficient if it matches the description in the financing statement. 
C)  ​sufficient if it accurately describes the parties' agreement. 
D)  ​not sufficient without an added description of the autos' other identifying characteristics.

Question 6

An employee can be discharged due to a garnishment order.

Accepted Answer

A) True 
 B)False

Question 7

Elvin fraudulently induces Franz, a consumer, to sign a promissory note to buy a speedboat. Elvin sells the note to Gaston, who takes it for value, in good faith, and without knowledge of the fraud. With respect to the defense against payment on the note to Elvin, Franz can​

Accepted Answer

A)  ​assert this defense against Gaston. 
B)  ​file for a property exemption. 
C)  ​exercise the right of subrogation. 
D)  ​obtain a deficiency judgment.

Question 8

Smartt Software Company borrows $10,000 from Term 'N All Loans, Inc., but cannot repay the loan when it comes due. Term 'N All refuses to extend the time for repayment unless Smartt can provide an acceptable surety. Uno Venture Corporation agrees to act as a surety for the loan after Smartt offers the firm a discount on software and shows Uno financial statements, compiled with Term 'N All's assistance, that misrepresent Smartt's financial situation. Later, after Uno uses the discount to buy software, Smartt again defaults on repayment of the loan, and Term 'N All files a suit against Uno to collect the amount of the debt. Is Uno liable? Why or why not?​

Accepted Answer

The answer of Smartt Software Company borrows $10,000 from Term...

Question 9

A buyer in the ordinary course of business has priority even if a previously perfected security interest exists as to the goods.

Accepted Answer

A) True 
 B)False

Question 10

Once default has occurred and the secured party has obtained possession of the collateral, the secured party has no more options.

Accepted Answer

A) True 
 B)False

Question 11

Fact Pattern 21-1
Petro Oil Refinery asks Quality Bank for a loan to increase its oil inventory. Quality requires Robin, Petro's president, sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to sell fifty barrels of refined oil to Slick Lubricants, Inc., Petro asks its outside accountant Tina to co-sign a credit application.
-Refer to Fact Pattern 21-1. If Robin is a guarantor, then the guaranty is required to be in writing because of​

Accepted Answer

A)  ​the debtor's right of redemption. 
B)  ​the co-signer's right of contribution. 
C)  ​the creditor's transfer of possession. 
D)  ​the Statute of Frauds.

Question 12

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by​

Accepted Answer

A)  ​attaching a bright label to John's property. 
B)  ​calculating the precise amount of John's debt. 
C)  ​correcting grammatical errors in the parties' written agreement. 
D)  ​filing a financing statement with the appropriate authority.

Question 13

Frances borrows $1,000 from Garden State Bank, using her recreational vehicle (RV) motor home, which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with​

Accepted Answer

A)  ​the secretary of state. 
B)  ​the county clerk. 
C)  ​the city treasurer. 
D)  ​Hugo's RV Sales & Service.

Question 14

Most of the customers in any business are buyers in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 15

If a creditor wins a judgment against a debtor and the debtor will not or cannot pay the amount due, the dispute is at an end.

Accepted Answer

A) True 
 B)False

Question 16

Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of​

Accepted Answer

A)  ​a bank. 
B)  ​a buyer in the ordinary course of business. 
C)  ​a subsequent lien creditor. 
D)  ​a trustee in bankruptcy.

Question 17

Frank performs a contract with Gene to add a garage to Gene's property, but Gene does not pay. Frank can file a lien on Gene's property if, from the last date labor or materials were provided, he acts​

Accepted Answer

A)  ​immediately. 
B)  ​within 60 to 120 days. 
C)  within two years. 
D)  ​within a reasonable time.

Question 18

Attachment gives the creditor an enforceable security interest in the collateral.

Accepted Answer

A) True 
 B)False

Question 19

A security interest is enforceable only if the debtor has title to the collateral.

Accepted Answer

A) True 
 B)False

Question 20

Where and how to perfect a security interest sometimes depends on the classification of the collateral.

Accepted Answer

A) True 
 B)False

Exam 21: Security Interests and Creditors Rights

Market Credit Corporation is the secured party in a secured transaction with Northwest Outfitters. Market Credit could also be referred to as

Advances against lines of credit can be subject to a perfected security interest in certain collateral.

A creditor's surrender of collateral to a debtor without the guarantor's consent can reduce the guarantor's obligation.

If a debtor does not pay a mechanic's lien, the debtor's property can be sold to satisfy the debt.

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

An employee can be discharged due to a garnishment order.

Elvin fraudulently induces Franz, a consumer, to sign a promissory note to buy a speedboat. Elvin sells the note to Gaston, who takes it for value, in good faith, and without knowledge of the fraud. With respect to the defense against payment on the note to Elvin, Franz can​

A buyer in the ordinary course of business has priority even if a previously perfected security interest exists as to the goods.

Once default has occurred and the secured party has obtained possession of the collateral, the secured party has no more options.

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by​

Frances borrows $1,000 from Garden State Bank, using her recreational vehicle (RV) motor home, which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with​

Most of the customers in any business are buyers in the ordinary course of business.

If a creditor wins a judgment against a debtor and the debtor will not or cannot pay the amount due, the dispute is at an end.

Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of​

Frank performs a contract with Gene to add a garage to Gene's property, but Gene does not pay. Frank can file a lien on Gene's property if, from the last date labor or materials were provided, he acts​

Attachment gives the creditor an enforceable security interest in the collateral.

A security interest is enforceable only if the debtor has title to the collateral.

Where and how to perfect a security interest sometimes depends on the classification of the collateral.

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is

Elvin fraudulently induces Franz, a consumer, to sign a promissory note to buy a speedboat. Elvin sells the note to Gaston, who takes it for value, in good faith, and without knowledge of the fraud. With respect to the defense against payment on the note to Elvin, Franz can

The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by

Frances borrows $1,000 from Garden State Bank, using her recreational vehicle (RV) motor home, which she purchased at Hugo's RV Sales & Service, as collateral. To perfect its security interest, the bank must file its financing statement with

Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of

Frank performs a contract with Gene to add a garage to Gene's property, but Gene does not pay. Frank can file a lien on Gene's property if, from the last date labor or materials were provided, he acts