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1. The holder of an artisan’s lien can foreclose and sell the property
subject to the lien to satisfy the debt.
1. A writ of execution is a court order to execute a debtor after the entry
of a final judgment in a creditor’s lawsuit against the debtor.
1. Under federal law, an employer can dismiss an employee because his
or her wages are being garnished.
1. A creditor can garnish almost all types of property.
1. A creditor’s composition agreement is usually held to be unenforceable.
1. Payment of the principal obligation will not discharge the guarantor from
the obligation.
1. Subrogation refers to the right of a co-surety to recover from the other
co-sureties the amount paid above his or her proportionate share of a
debt.
1. Making any material modification in the terms of a debtor’s contract,
without the consent of the surety, will not discharge the surety’s
obligation.
1. Each state permits a debtor to retain the family home, in its entirety or
in part, free from the claims of unsecured creditors.
1. Personal property that is most often exempt from satisfaction of judg-
ment debts does not include livestock.
1. A debtor does not need to be insolvent to file for bankruptcy relief.
1. A debtor wishing to file for bankruptcy must complete the means test to
determine whether he or she qualifies.
1. An involuntary bankruptcy occurs when the debtor’s credit does not
cover all of his or her debts.
1. An individual debtor is allowed to exempt certain property from the
bankruptcy.
1. Certain debts are not dischargeable in bankruptcy.
1. A bankruptcy court may deny a discharge based on the debtor’s
conduct.
1. A reorganization plan is a plan to conserve and administer the debtor’s
assets in the hope that all of the creditors will eventually be paid in
full.
1. Certain reorganization cases may be converted to repayment plan
cases with the consent of the debtor.
1. In a repayment plan case, after the debtor has completed all payments,
the court grants a discharge of all debts provided for by the plan.
1. The content of a family-fisherman bankruptcy plan is basically the same
as that of a repayment plan.
1. Urbana performs a contract with Virgil to add a sun porch to Virgil’s
house, but Virgil does not pay. In most states, Urbana can create a
lien and place it on Virgil’s property by filing
a. a written guaranty contract.
b. a writ of attachment.
c. a writ of execution.
d. a written notice of lien.
1. Bartleby owes $5,000 to Countryside Credit Union. As a prejudgment
remedy to collect the debt, Countryside could use
a. attachment.
b. contribution.
c. execution.
d. subrogation.
1. Suchin’s debt to Trixie is past due. Trixie obtains a judgment against
Suchin to collect the debt, but Suchin refuses to pay. Trixie asks the
court to order the seizure and sale of Suchin’s property. This is a
request for
a. a guaranty (or suretyship) contract.
b. an order that would violate most states’ laws.
c. an order of receivership.
d. a writ of execution.
1. Mike owes $12,000 to Nora, $6,000 to Owen, and $6,000 to Pat. The
three creditors enter into an agreement with Mike to discharge the
debts on payment of a sum of $12,000 to them, to be divided
proportionately. This is
a. a composition agreement.
b. a guaranty agreement.
c. a judicial lien.
d. a suretyship agreement.
1. Rico signs a lease on behalf of Start-Up Games, Inc., with Tower
Office Suites. As part of the lease, Rico signs a document titled
“GUARANTY,” which states that it is “an absolute guaranty” of the
lease’s performance.Refer to Fact Pattern 15-1B. If Start-Up stops
paying the rent, it is most likely that liability or loss for the unpaid
amount will rest with
a. no one.
b. Rico and Start-Up.
c. Tower Office Suites.
d. the other tenants on the same property.
1. Rico signs a lease on behalf of Start-Up Games, Inc., with Tower
Office Suites. As part of the lease, Rico signs a document titled
“GUARANTY,” which states that it is “an absolute guaranty” of the
lease’s performance.Refer to Fact Pattern 15-1B. The reason for the
result in the previous question is that
a. Rico signed a “GUARANTY.”
b. Tower Office Suites owns the property and can re-rent the
premises.
c. the other tenants can equitably absorb a slight increase in rent.
d. Start-Up will likely move out when it stops paying the rent.
1. Bill and Cody agree to guarantee Wyatt’s debt. Bill’s maximum liability
is $60,000, and Cody’s is $40,000. Wyatt owes $40,000 and is in
default. Bill pays the creditor the entire amount. In the absence of an
agreement to the contrary, Bill can recover from Cody
a. 0.
b. $16,000.
c. $20,000.
d. $40,000.
1. Mary’s home is in a state that has a $30,000 homestead exemption.
Mary defaults on a $60,000 debt that she owes to Nina. Mary’s home
is sold at auction for $80,000.Refer to Fact Pattern 15-2B. Nina may
recover
a. 0.
b. $30,000.
c. $50,000.
d. $60,000.
1. Mary’s home is in a state that has a $30,000 homestead exemption.
Mary defaults on a $60,000 debt that she owes to Nina. Mary’s home
is sold at auction for $80,000.Refer to Fact Pattern 15-2B. Mary will
receive
a. 0.
b. $30,000.
c. $50,000.
d. $60,000.
1. Mary’s home is in a state that has a $30,000 homestead exemption.
Mary defaults on a $60,000 debt that she owes to Nina. Mary’s home
is sold at auction for $80,000.Refer to Fact Pattern 15-2B. If Nina
recovers less than she is owed, she can realize the difference from
a. any property that Mary owns.
b. only exempt property that Mary owns.
c. only nonexempt property that Mary owns.
d. property that any other member of Mary’s family owns.
1. Delilah files a petition in bankruptcy. The proceeding is governed by
the Bankruptcy Code, which is part of
a. state law.
b. federal law.
c. the U.S. Constitution.
d. international law.
1. Nikita operates a sole proprietorship, a corporation, and a partnership.
Nikita wants to obtain relief for her individual debts and the debts of
her corporation and partnership. For each of these, Nikita may file a
petition in bankruptcy for relief through
a. a liquidation.
b. a reorganization.
c. a repayment plan.
d. a family-farmer bankruptcy plan.
1. Seth files a petition for bankruptcy. Seth must include with the petition
a. proof of each creditor’s claim.
b. a list of creditors and the amount of the debt owed to each.
c. all of his debit and credit cards to be disposed of by the court.
d an affidavit testifying to his having read the Bankruptcy Code.
1. Thirty-one days before filing a petition in bankruptcy, Frida transfers
property and makes payments that favor one creditor over another.
These are
a. affirmation agreements.
b. preferences.
c. secured interests.
d. unsecured debts.
1. Mac files a petition for a discharge in bankruptcy. Mac’s failure to ap-
pear at a meeting of the creditors listed in Mac’s schedules may result
in Mac being
a. denied a discharge of bankruptcy.
b. fined.
c. held in contempt.
d. imprisoned.
1. Pola files a petition in bankruptcy. Pola’s non-dischargeable debts
include
a. domestic-support obligations.
b. student loans if payment would impose undue hardship.
c. unpaid loans to finance home repairs.
d. unsecured credit-card debt.
1. Petulia is a debtor. Her employer Quantum Investments, Inc., her alma
mater State University, and TimePay Credit Company are her creditors.
For these parties, a petition in bankruptcy for relief through an individ-
ual’s repayment plan could be filed on Petulia’s behalf by Petulia and
a. none of the other parties.
b. her employer or her creditors.
c. her creditors only.
d. her employer only.
1. Checkerboard Pizza, Inc. (CPI), files a petition in bankruptcy for relief
through a reorganization. CPI’s reorganization plan must contain
a. a plan to turn over its future income to the trustee.
b. a certificate proving attendance at a credit-counseling briefing.
c. a provision of adequate means for the plan’s execution.
d a statement of preference for one creditor over another.
1. To adjust debts and institute a repayment plan that is less expensive
and less complicated than other options, Brunch & Lunch Café, a small
business, may file a petition in bankruptcy for relief through
a. a liquidation.
b. a reorganization.
c. a repayment plan.
d. a family-farmer bankruptcy plan.
1. Zeke files a petition in bankruptcy for relief through an individual’s
repayment plan. Zeke’s plan must provide for
a. the turnover of his future income to the trustee.
b. his attendance at a credit-counseling briefing.
c. adequate means for the petition’s execution.
d a preference for one creditor over another.
1. Brie is a student at Collegiate University. In need of funds to pay for
tuition and books, Brie asks Dependable Bank for a short-term loan.
The bank agrees to make a loan if Brie will have someone who is
financially responsible guarantee the loan payments. Esperanza, a well-
known businessperson and a friend of Brie’s family, calls the bank and
agrees to pay the loan if Brie cannot. Because of Esperanza’s
reputation, the loan is made. Brie is making the payments, but because
of illness she is unable to work for one month. She asks Dependable
extend the loan for three months. The bank agrees, raising the interest
rate for the extended period. Esperanza is not notified of the extension
(and thus does not consent to it). One month later, Brie drops out of
school. All attempts to collect the remainder of the loan from Brie fail.
Can Dependable assert a claim against Esperanza on the debt?
1. First State Bank is a secured party on a $5,000 loan to Geoff, who
owns Happy Hours, a nightclub. When Geoff experiences financial
difficulty, creditors other than First State Bank petition him into
involuntary bankruptcy. The value of the secured collateral has
substantially decreased in value. On its sale, the debt to First State
Bank is reduced to $2,500. Geoff’s estate consists of $100,000 in
exempt assets and $2,000 in nonexempt assets. After the bankruptcy
costs and back wages to Geoff’s employees are paid, nothing is left for
unsecured creditors. Geoff receives a discharge in bankruptcy. Later he
decides to go back into business. By selling a few exempt assets and
getting a small loan, he is able to buy the Idle Inn, a small, but
profitable, restaurant. Geoff goes to First State Bank for the loan. The
bank claims that the balance of its secured debt was not discharged in
Geoff’s bankruptcy. He signs an agreement to pay First State Bank the
$2,500, and the bank makes a new unsecured loan to him. Is First
State Bank correct that the balance of its secured debt was not
discharged in bankruptcy? What is the legal effect of Geoff’s agreement
to pay the bank $2,500 after the discharge in bankruptcy?
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