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172. If a debtor is insolvent, the unsecured creditor:
a. can only collect half the bill
b. can only collect three quarters of the bill
c. cannot collect the bill
d. can collect the bill, plus interest
e. can collect the bill, plus punitive damages
173. A secured creditor is one who:
a. is insured by a third party
b. can take a debtor's property to try to satisfy the debt
c. does not use security to obtain a loan
d. does not use collateral to obtain a loan
e. is insured by the FSLIC
174. A secured creditor is one who:
a. is insured by a third party
b. is insured by the FSLIC
c. does not use security to obtain a loan
d. does not use collateral to obtain a loan
e. none of the other choices
175. A creditor can obtain the property of a debtor:
a. if the debtor and creditor sign a negotiable instrument agreement
b. through operation of law
c. if the debtor enters into such an arrangement
d. if the debtor and creditor sign a negotiable instrument agreement and through operation of law
e. through operation of law and if the debtor enters into such an arrangement
176. A business is a when it has the ability to take some of the nonpaying customers' property to satisfy the debt.
a. general creditor
b. secured creditor
c. collateral creditor
d. real creditor
e. financed creditor
177. A business is a when it has the ability to take some of the nonpaying customers' property to satisfy the debt.
a. general creditor
b. financed creditor
c. collateral creditor
d. real creditor
e. none of the other choices are correct
178. The primary distinction in secured credit transaction is whether the property:
a. is tangible or intangible
b. may or may not be stored
c. is money or something else
d. is real or personal
e. is insured or not
179. The primary distinction in secured credit transaction is whether the property:
a. is tangible or intangible
b. may or may not be stored
c. is money or something else
d. is insured or not
e. none of the other choices
180. The agreement providing security in real property is a(n):
a. mortgage
b. guaranty
c. suretyship
d. easement
e. draft
181. The agreement providing security in real property is a(n):
a. draft
b. guaranty
c. suretyship
d. easement
e. none of the other choices are correct
182. A suretyship for a small business is usually:
a. a pledge of personal assets by the owners
b. a pledge of company assets by the bank
c. a promissory note
d. a percentage of ownership in the company
e. none of the other choices are correct
183. A suretyship is most often required for:
a. loans for personal property
b. a loan of personal property
c. major debts
d. debts that are unsecured
e. educational loans
184. In a suretyship:
a. a bank immediately accepts the credit of its debtor
b. the credit of a third party secures a debt
c. the credit of the debtor is sufficient to secure a debt
d. a bank takes a property interest in the debtor's real estate
e. none of these
185. In a contract for suretyship, the borrower or debtor is referred to as the:
a. de facto debtor
b. borrowee
c. principal
d. surety
e. guarantor
186. In a contract for suretyship the third party who is responsible for the borrower's payment obligations, or
performance, to a creditor is known as the:
a. surety
b. borrowee
c. principal
d. lender
e. guarantor
187. In a contract for suretyship the third party who is responsible for the borrower's payment obligations, or
performance, to a creditor is known as the:
a. banker
b. borrowee
c. principal
d. lender
e. none of the other choices are correct
188. Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the
funds. Billy convinces Gary to back-up his credit. Gary is:
a. the principal
b. the grantor
c. the testator
d. the surety
e. the detainor
189. Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the
funds. Billy convinces Gary to back-up the credit he gets from a bank. Gary is:
a. the principal
b. the grantor
c. the testator
d. the detainor
e. none of the other choices
190. Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the
funds. Billy convinces Gary to back-up the credit he gets from a bank. On the loan, Billy is:
a. the principal
b. the grantor
c. the sorrier
d. the surety
e. the guarantor
191. Billy wants to borrow $10,000 to start a male belly dancing business. Creditors are not anxious to lend him the
funds. Billy convinces Gary to back-up the credit he gets from a bank. On the loan, Billy is:
a. the guarantor
b. the grantor
c. the sorrier
d. the surety
e. none of the other choices
192. A guarantor is generally the same as:
a. the principal
b. the debtor
c. the surety
d. the grantor
e. the testator
193. A guarantor is generally the same as:
a. the principal
b. the debtor
c. the testator
d. the grantor
e. none of the other choices
194. What defense(s) is (are) available to sureties?
a. impossibility
b. duress
c. fraud
d. duress or fraud only
e. duress, fraud or impossibility
195. 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:
a. granted 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
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. dismissed the case due to improper filing of court documents
196. 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:
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
197. Hill owned a roofing business that had an account at Lowe's to buy supplies. He sold the business to his employees
who had used the account. When he sold the business, he asked a person at Lowe's to close the account. The
account documents stated that to close the account, Hill must contact Lowe's headquarters in writing, but he did
not. His former employees ran up a bill on the account. Lowe's sued Hill for the balance due as the former
employees were bankrupt. Most likely, the court would hold that Lowe's could:
a. only collect from the new owners because Hill was not a surety
b. not collect from anyone since the new owners were bankrupt and Hill was not a surety
c. collect from Hill because he was a surety on the business, even if not a surety on the Lowe's account
d. collect from Hill because he failed to close the account properly
e. none of the other choices
198. Hill owned a roofing business that had an account at Lowe's to buy supplies. He sold the business to his employees
who had used the account. When he sold the business, he asked a person at Lowe's to close the account. The
account documents stated that to close the account, Hill must contact Lowe's headquarters in writing, but he did
not. His former employees then ran up a bill on the account. Lowe's sued Hill for the balance due as the former
employees were bankrupt. Most likely, the court would hold that Lowe's could:
a. only collect from the new owners because Hill was not a surety
b. not collect from anyone since the new owners were bankrupt and Hill was not a surety
c. collect from Hill because he was a surety on the business, even if not a surety on the Lowe's account
d. collect from Hill because he had engaged in fraud in the sale of the business
e. none of the other choices
199. If the principal does not pay the creditor, and the surety has to satisfy the debt, the principal:
a. is obligated to repay the surety
b. is not obligated to repay the surety
c. is only obligated to repay the surety in some states
d. is only obligated to repay the surety 50% of the debt
e. is only obligated to repay the surety 25% of the debt
200. If the principal does not pay the creditor, and the surety has to satisfy the debt, the principal:
a. is only obligated to repay the surety 25% of the debt
b. is not obligated to repay the surety
c. is only obligated to repay the surety in some states
d. is only obligated to repay the surety 50% of the debt
e. none of the other choices are correct
201. Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First Bank requires Mike
to pay the balance of the loan. In this case, Mike may sue:
a. First for violating its guarantor obligations
b. First for defrauding him
c. Tiny to reimburse or exonerate him
d. Tiny to enslave himself to Mike
e. First to exonerate him
202. Tiny borrows $20,000 from First Bank. Mike is the surety on the loan. Tiny defaults and First Bank requires Mike
to pay the balance of the loan. In this case, Mike may sue:
a. First for violating its guarantor obligations
b. First for defrauding him
c. First to exonerate him
d. Tiny to become an indentured servant
e. none of the other choices
203. The law regarding the kinds of credit that may be applied to personal property is:
a. the common law of torts
b. Art. 2 of the UCC
c. Art. 9 of the UCC
d. the Bankruptcy Code
e. the law of preferred interests
204. The law regarding the kinds of credit that may be applied to personal property is:
a. the common law of torts
b. Art. 2 of the UCC
c. the law of preferred interests
d. the Bankruptcy Code
e. none of the other choices
205. The financing of commercial sales of goods is governed by:
a. Article 2 of the UCC
b. Article 9 of the UCC
c. the Constitution
d. the Bankruptcy Code
e. common law
206. Fern TV sells Ryan a 52" plasma television. Ryan does not have the cash necessary to buy the TV, so Fern allows
him to make 12 monthly payments. If Ryan misses any payments, Fern may take the TV back. Fern:
a. is an unsecured creditor
b. has a security interest
c. is a perfected debtor
d. is an unsecured creditor with a perfected interest
e. none of the other choices
207. To create a legally valid security interest, a business must ensure that the interest is:
a. perfected
b. debated
c. united
d. detached
e. exposed
208. To create a legally valid security interest, a business must ensure that the interest is:
a. exposed
b. debated
c. united
d. detached
e. none of the other choices
209. An attached interest means:
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
210. Which of the following are necessary for a security interest to attach:
a. the security agreement must be signed by the customer
b. the seller must have provided value
c. the customer must have legal, transferable rights in the collateral
d. all of the other specific choices are correct
e. none of the other specific choices are correct
211. In order to establish a superior right, a creditor must:
a. prohibit a default
b. insure the debt instrument
c. perfect the security interest
d. keep the existence of the security interest a secret
e. do none of these things
212. In order to establish a superior right, a creditor must:
a. prohibit a default
b. insure the debt instrument
c. place a notice of the interest in the Federal Register
d. keep the existence of the security interest a guarded right
e. none of the other choices
213. Under the UCC, a security interest for consumer goods is perfected:
a. without filing
b. only with filing
c. if the creditor fills out the proper forms in court
d. if the creditor is approved by a court official
e. none of the other choices are correct
214. When a creditor extends credit to a debtor, to protect itself, the creditor should:
a. take a security interest in an asset owned by the debtor
b. make sure to attach any security interest it takes
c. make sure that its security interests are not perfected
d. take a security interest in an asset owned by the debtor and make sure to attach any security interest it takes
e. take a security interest in an asset owned by the debtor and make sure to attach any security interest it takes
and make sure the security interests are not perfected
215. When a business lends another business money, it should perfect its security interest by:
a. applying to the IRS for security
b. filing its financing statement with the state secretary of state
c. preparing its inventory for satisfaction
d. obtaining a late-term guarantor
e. none of the other choices
216. When a business lends another business money, it should perfect its security interest by:
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
217. Lisa goes to the local appliance store and buys an oven on credit. The store extends her credit. The store's security
interest in the oven perfects when:
a. Lisa completes the financing statement and leaves with the oven
b. the store files the financing statement with the Secretary of State
c. the store posts notice of Lisa's security interest in the newspaper
d. the store posts notice of its security interest
e. the store notifies consumer credit agencies of the existence of the security interest
218. Lisa goes to the local appliance store and buys an oven on credit. The store extends her credit. The store's security
interest in the oven perfects when the store:
a. notifies consumer credit agencies of the existence of the security interest
b. gets Lisa to agree that the oven will be a security
c. posts notice of Lisa's security interest in the newspaper
d. posts notice of its security interest in a "public location"
e. none of the other choices
219. Inventory may be used as collateral for a loan. If it is, the inventory is classified as:
a. intangible property
b. tangible property
c. intellectual property
d. real property
e. gross property
220. Inventory may be used as collateral for a loan. If it is, the inventory is classified as:
a. intangible property
b. gross property
c. intellectual property
d. real property
e. none of the other choices
221. Goods that are movable at the time a security interest attaches, or begins are classified as:
a. tangible property
b. intangible property
c. movable property
d. insubstantial property
e. notable property
222. Goods that are movable at the time a security interest attaches, or begins are classified as:
a. notable property
b. intangible property
c. movable property
d. insubstantial property
e. none of the other choices are correct
223. Under the UCC, includes goods held for sale as well as raw materials.
a. collateral
b. intangible property
c. inventory
d. investment
e. sales
224. Under a floating lien:
a. specific collateral only is used
b. when collateral is sold the lien expires
c. new inventory is unavailable to replace old collateral
d. new inventory is used to replace collateral that is sold
e. real estate is the collateral used
225. Under a floating lien:
a. specific collateral only is used
b. when collateral is sold the lien expires
c. new inventory is unavailable to replace old collateral
d. real estate is the collateral used
e. none of the other choices
226. Under the UCC, to avoid the problem of constantly issuing new financing contracts every time a business buys
more inventory from a supplier, the parties may use:
a. a priority interest
b. a tangible property lien
c. a floating lien
d. a perfected lien
e. none of the other choices
227. With a(n)
new inventory.
the security interest in any specific item of inventory ends when the item is sold, but attaches to
a. temporary lien
b. floating lien
c. inventory lien
d. transitory lien
e. transferable lien
228. With a(n)
new inventory.
the security interest in any specific item of inventory ends when the item is sold, but attaches to
a. temporary lien
b. transferable lien
c. inventory lien
d. transitory lien
e. none of the other choices are correct
