978-0538496902 Chapter 33 Part 1

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STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—1ȱQUIZȱ

LegalȱConceptsȱȱ

Directions:ȱInȱtheȱAnswersȱcolumn,ȱwriteȱtheȱletterȱfromȱColumnȱ1ȱthatȱrepresentsȱ

theȱwordȱorȱphraseȱthatȱmatchesȱtheȱstatementȱinȱColumnȱ2.ȱ

ȱColumnȱ1ȱȱColumnȱ2ȱAnswersȱ

ȱȱ 1.ȱGivesȱtheȱcreditorȱtheȱrightȱtoȱsellȱaȱspeciȬȱȱȱ 1. _______ ȱ

ficȱpropertyȱinȱtheȱcaseȱofȱdefaultȱonȱaȱpayȬ

mentȱandȱuseȱtheȱproceedsȱtoȱpayȱtheȱdebtȱȱ

ȱȱ 2.ȱCreditorȱwhoȱgetsȱpossessionȱofȱtheȱpropȬȱ 2. _______ ȱ

ertyȱ

ȱȱ 3.ȱLienȱthatȱallowsȱaȱpersonȱwhoȱhasȱnotȱȱ 3. _______ ȱ

beenȱpaidȱforȱservicesȱtoȱretainȱpossessionȱ

ofȱtheȱitemȱtoȱbeȱservicedȱuntilȱtheyȱareȱpaidȱ

ȱȱ 4.ȱContractualȱrelationshipȱinȱwhichȱaȱthirdȱȱ 4. _______ ȱ

partyȱagreesȱtoȱbeȱprimarilyȱliableȱforȱtheȱ

debtȱorȱobligationȱifȱpaymentȱbyȱtheȱprinciȬ

palȱobligorȱbecomesȱoverdueȱ

A.ȱunsecuredȱdebtȱ

B.ȱpledgorȱ

C.ȱmechanic’sȱlienȱ

D.ȱsuretyȱ

E.ȱartisan’sȱlienȱ

F.ȱlienȱ

G.ȱpawnȱ

H.ȱsuretyshipȱ

I.ȱpledgeeȱ

.ȱdeedȱofȱtrustȱ

K.ȱgarnishmentȱ

ȱȱ 5.ȱDebtorȱwhoȱvoluntarilyȱgivesȱupȱpossesȬȱ 5. _______ ȱ

sionȱofȱtheȱpropertyȱ

ȱȱ 6.ȱThirdȱpartyȱwhoȱpromisesȱtoȱbeȱliableȱinȱȱ 6. _______ ȱ

caseȱofȱdefaultȱbyȱtheȱprincipalȱdebtorȱ

ȱȱ 7.ȱLienȱthatȱallowsȱaȱpersonȱwhoȱhasȱnotȱȱ 7. _______ ȱ

beenȱpaidȱforȱlaborȱtoȱbuildȱaȱhouseȱorȱ

buildingȱtoȱfileȱaȱlegalȱclaimȱagainstȱtheȱ

propertyȱ

ȱȱ 8.ȱPledgeȱofȱtangibleȱpersonalȱproperty,ȱȱ 8. _______ ȱ

usuallyȱofȱsmallȱsizeȱandȱcomparativelyȱȱ

highȱvalueȱ

ȱȱ 9.ȱProcessȱofȱreceivingȱaȱportionȱofȱtheȱȱ 9. _______ ȱ

debtor’sȱwagesȱdirectlyȱfromȱtheȱdebtor’sȱ

employerȱ

ȱȱ 10.ȱDeedȱunderȱwhichȱtermsȱtheȱtitleȱtoȱ10._______ ȱ

propertyȱisȱtransferredȱbyȱtheȱdebtor/ȱȱ

ȱȱ ȱownerȱintoȱtheȱhandsȱofȱaȱtrusteeȱ

ȱȱ 11.ȱDebtȱbasedȱonlyȱonȱtheȱoralȱorȱwrittenȱȱ 11._______ ȱ

promiseȱofȱtheȱdebtorȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-61

LegalȱApplicationȱ

12.ȱAfterȱlosingȱhisȱwalletȱwhileȱvacationing,ȱDougȱpawnedȱhisȱwatchȱandȱtwoȱringsȱ

forȱ$300ȱtoȱpayȱforȱhisȱtripȱhome.ȱTheȱpawnbrokerȱhasȱnotȱheardȱfromȱDougȱforȱ

6ȱweeks.ȱIsȱheȱfreeȱtoȱsellȱtheȱitemsȱandȱretainȱtheȱproceeds?ȱExplainȱyourȱanȬ

swer.ȱ

7-62 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—1ȱPRACTICEȱACTIVITYȱ

Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ

spaceȱisȱneededȱforȱanswers.ȱ

1.ȱWestȱPaintingȱwasȱaȱcorporationȱthatȱenteredȱintoȱaȱcontractȱwithȱZidellȱtoȱpaintȱ

aȱbarge.ȱTheȱtermsȱofȱpaymentȱwereȱsuchȱthatȱZidellȱwasȱtoȱpayȱWestȱinȱperiodicȱ

insteadȱowedȱWestȱ“earnings”ȱandȱthatȱ“earnings”ȱareȱnotȱsubjectȱtoȱgarnishȬ

ment.ȱWhoȱisȱcorrect?ȱExplain.ȱ[Zidellȱv.ȱWestȱPainting,ȱInc.,ȱ906ȱP.ȱ2dȱ809ȱ(Ore.ȱ

1995)]ȱ

2.ȱMarvinȱborrowedȱ$280,000ȱfromȱBierȱforȱthreeȱmonthsȱatȱ12%ȱinterest.ȱJoelȱguarȬ

anteedȱtheȱdebtȱinȱwriting.ȱMarvinȱdidȱnotȱrepayȱtheȱloanȱwhenȱitȱwasȱdue,ȱbutȱ

MustȱBierȱhaveȱcollectedȱonȱtheȱdebtȱimmediatelyȱinȱorderȱtoȱrecover?ȱExplain.ȱ

[BierȱPensionȱPlanȱv.ȱEstateȱofȱSchneierson,ȱ545ȱN.E.ȱ2dȱ1212ȱ(N.Y.ȱCt.ȱApp.ȱ1989)]ȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-63

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—1ȱRETEACHȱ

Directions:ȱFindȱandȱshadeȱinȱtheȱanswerȱtoȱeachȱquestionȱinȱtheȱtableȱbelowȱandȱ

thenȱwriteȱeachȱanswerȱinȱtheȱanswerȱcolumn.ȱWriteȱtheȱremainingȱunshadedȱlettersȱ

inȱorderȱfromȱleftȱtoȱrightȱtoȱrevealȱaȱstatementȱaboutȱgarnishment.ȱ

Answersȱ

1.ȱWhatȱnameȱisȱgivenȱtoȱaȱdebtorȱwhoȱvoluntarȬȱ ȱ 1. ______________________ ȱȱ

ilyȱgivesȱupȱpossessionȱofȱtheȱproperty?ȱ

2.ȱWhatȱkindȱofȱaȱlienȱcanȱbeȱusedȱbyȱaȱpersonȱȱ ȱ 2. ______________________ ȱ

whoȱhasȱnotȱbeenȱpaidȱforȱlaborȱorȱmaterialsȱ

usedȱinȱbuildingȱaȱhouseȱorȱbuilding?ȱ

3.ȱWhatȱthirdȱpartyȱpromisesȱtoȱbeȱliableȱinȱcaseȱaȱȱ ȱ 3. ______________________ ȱȱ

principalȱdebtorȱdefaults?ȱ

4.ȱWhatȱkindȱofȱlienȱcanȱbeȱusedȱbyȱaȱpersonȱwhoȱȱ ȱ 4. ______________________ ȱȱ

hasȱnotȱbeenȱpaidȱforȱservicesȱperformed?ȱ

5.ȱWhatȱisȱaȱcreditor’sȱsecurityȱinterestȱinȱaȱspeȬȱȱ ȱȱ5. ______________________ ȱȱ

cificȱpropertyȱcalled?ȱ

6.ȱWhatȱisȱaȱpledgeȱofȱtangibleȱpersonalȱpropertyȱȱ ȱ6. ______________________ ȱȱ

thatȱisȱusuallyȱsmallȱandȱofȱrelativelyȱhighȱvalȬ

ue?ȱ

7.ȱWhatȱkindȱofȱcontractȱoccursȱwhenȱaȱthirdȱȱ ȱ 7. ______________________ ȱȱ

partyȱagreesȱtoȱbeȱprimarilyȱliableȱforȱtheȱdebtȱifȱ

paymentȱbecomesȱoverdue?ȱ

8.ȱWhatȱtermȱrefersȱtoȱaȱcreditorȱwhoȱgetsȱpossesȬȱ ȱ 8. ______________________ ȱȱ

sionȱofȱtheȱproperty?ȱ

9.ȱWhatȱkindȱofȱdebtȱisȱbasedȱonlyȱonȱtheȱoralȱorȱȱ ȱ9. ______________________ ȱȱ

writtenȱpromiseȱofȱtheȱdebtor?ȱ

10.ȱWhatȱisȱtheȱprocessȱofȱreceivingȱaȱportionȱofȱȱȱȱȱȱȱȱȱȱȱȱȱ10. ______________________ ȱȱ

theȱdebtor’sȱwagesȱdirectlyȱfromȱtheȱdebtor’sȱ

employer?ȱ

AȱSȱMȱUȱPȱLȱEȱDȱGȱOȱRȱCȱHȱAȱSȱTȱ

WȱEȱNȱSȱUȱRȱEȱTȱYȱTȱYȱFȱIȱLȱIȱEȱ

7-64 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—1ȱENRICHMENTȱ

Theȱlegalȱprotectionȱofȱcreditorsȱwasȱdiscussedȱinȱthisȱlesson.ȱTheȱprimaryȱconcernȱ

ofȱaȱtypicalȱcreditorȱisȱthatȱtheȱloanȱbeȱpromptlyȱpaidȱwhenȱdue.ȱThus,ȱlegislationȱ

hasȱbeenȱpassedȱtoȱprotectȱcreditorsȱagainstȱbadȱdebtȱlosses.ȱThereȱareȱfourȱtypesȱofȱ

lawsȱthatȱprotectȱcreditors:ȱlawsȱallowingȱsecuredȱdebts,ȱlawsȱinvolvingȱthirdȱparȬ

ties,ȱlawsȱconcerningȱunsecuredȱdebts,ȱandȱlawsȱallowingȱgarnishmentȱofȱwages.ȱ

Talkȱwithȱaȱlawyerȱorȱresearchȱaȱlegalȱdatabaseȱtoȱfindȱactualȱcasesȱwhereȱeachȱofȱ

theseȱtypesȱofȱlawsȱwereȱsuccessfullyȱusedȱtoȱhelpȱaȱcreditor.ȱProvideȱdetailsȱofȱeachȱ

caseȱinȱtheȱspacesȱprovided.ȱ

2.ȱLawsȱinvolvingȱthirdȱpartiesȱ

4.ȱLawsȱallowingȱgarnishmentȱofȱwagesȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-65

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—2ȱQUIZȱ

LegalȱConceptsȱ

Directions:ȱPlaceȱaȱYȱforȱYesȱorȱanȱNȱforȱNoȱinȱtheȱAnswersȱcolumnȱtoȱindicateȱtheȱ

correctȱanswer.ȱ

Answersȱ

1.ȱDoȱusuryȱlawsȱapplyȱtoȱcarryingȱchargesȱimposedȱonȱcreditȱȱ 1.ȱ______ ȱ

purchasesȱofȱgoodsȱandȱservicesȱ“onȱtime”?ȱ

2.ȱDoesȱtheȱfederalȱTruthȱinȱLendingȱActȱlimitȱtheȱpercentageȱofȱȱ 2.ȱ______ ȱ

interestȱthatȱmayȱbeȱchargedȱonȱaȱloan?ȱ

3.ȱAreȱcreditorsȱrequiredȱtoȱmakeȱaȱfullȱdisclosureȱofȱfinanceȱchargesȱȱ 3.ȱ______ ȱ

onȱconsumerȱloans?ȱ

4.ȱMightȱaȱcontractȱthatȱisȱfoundȱtoȱbeȱgrosslyȱunfairȱandȱoppressiveȱȱ 4.ȱ______ ȱ

beȱdeemedȱunconscionableȱunderȱtheȱUCC?ȱ

5.ȱIsȱtheȱtotalȱpriceȱpaidȱinȱlendingȱusuallyȱhigherȱthanȱaȱcashȱorȱȱ 5.ȱ______ ȱ

creditȱpurchaseȱwouldȱbe?ȱ

6.ȱCanȱaȱcreditorȱaskȱforȱanȱapplicant’sȱmaritalȱstatusȱifȱtheȱȱ 6.ȱ______ ȱ

applicantȱisȱapplyingȱforȱanȱunsecuredȱseparateȱaccount?ȱ

7.ȱCanȱcreditȱcardȱholdersȱwithholdȱpaymentsȱforȱitemsȱthatȱproveȱȱ 7.ȱ______ ȱ

defectiveȱwithoutȱbeingȱheldȱliableȱforȱtheȱentireȱamountȱowed?ȱ

8.ȱMustȱaȱcompanyȱwhoȱdeniesȱanȱapplicantȱcreditȱgiveȱtheȱȱ 8.ȱ______ ȱ

applicantȱaȱreasonȱforȱtheȱdenial?ȱ

9.ȱWasȱtheȱFederalȱFairȱCreditȱReportingȱActȱenactedȱtoȱgovernȱȱ 9.ȱ______ ȱ

companiesȱthatȱhelpȱconsumersȱrepairȱtheirȱcreditȱhistories?ȱ

10.ȱIsȱaȱcreditȱcardȱholderȱliableȱforȱtheȱunauthorizedȱuseȱofȱtheȱȱ 10.ȱ______ ȱ

creditȱcard?ȱ

LegalȱApplicationȱ

11.ȱChrystelleȱappliedȱforȱandȱreceivedȱaȱcreditȱcardȱfromȱAmy’sȱDressȱShop.ȱTheȱ

applicationȱformȱdidȱnotȱexplainȱwhatȱtoȱdoȱinȱcaseȱtheȱcardȱwasȱstolenȱorȱlost.ȱ

Twoȱmonthsȱlater,ȱChrystelleȱlostȱtheȱcard.ȱBeforeȱsheȱcouldȱnotifyȱtheȱdressȱ

shop,ȱanȱ$82.56ȱpurchaseȱwasȱmadeȱwithȱtheȱcard.ȱIsȱChrystelleȱliableȱforȱtheȱ$50ȱ

limit,ȱliableȱforȱtheȱamountȱofȱ$82.56,ȱorȱnotȱliableȱatȱall?ȱExplainȱyourȱanswer.ȱ

7-66 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—2ȱPRACTICEȱACTIVITYȱ

Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ

spaceȱisȱneededȱforȱanswers.ȱ

1.ȱMrs.ȱAndersonȱattemptedȱtoȱsecureȱaȱloanȱusingȱhouseholdȱgoodsȱasȱcollateral.ȱ

SheȱappliedȱtoȱUnitedȱFinanceȱCompany.ȱAfterȱconductingȱanȱinvestigationȱtoȱ

determineȱherȱcreditworthiness,ȱUnitedȱapprovedȱherȱloan.ȱHowever,ȱtheȱ

provedȱMrs.ȱAnderson’sȱloanȱindividually,ȱbutȱtheȱloanȱwasȱmadeȱoutȱinȱtheȱ

nameȱofȱherȱandȱherȱspouse,ȱandȱtheȱcheckȱforȱtheȱfundsȱwasȱmadeȱoutȱsolelyȱinȱ

theȱnameȱofȱherȱspouse.ȱMrs.ȱAndersonȱsuedȱunderȱtheȱEqualȱCreditȱOpportuȬ

nityȱAct,ȱallegingȱdiscrimination.ȱWillȱsheȱwinȱtheȱcase?ȱExplain.ȱ[Andersonȱv.ȱ

2.ȱWinfredȱJonesȱwasȱemployedȱatȱSimonsonȱLumber.ȱSimonsonȱofferedȱinsuranceȱ

toȱitsȱemployees.ȱTheȱinsuranceȱcoverageȱwasȱselectedȱbyȱGlennȱWallace,ȱtheȱ

personnelȱmanagerȱatȱSimonson.ȱWallaceȱcouldȱnotȱnegotiateȱtheȱtermsȱofȱtheȱ

differentȱpolicies,ȱbutȱheȱselectedȱtheȱpolicyȱthatȱofferedȱtheȱmostȱcoverage.ȱ

personnelȱofficeȱifȱtheyȱwishedȱtoȱreadȱit.ȱTheȱemployeesȱwereȱgivenȱaȱbooklet,ȱ

butȱthisȱbookletȱdidȱnotȱmentionȱtheȱexclusion.ȱUponȱWinfred’sȱdeath,ȱtheȱinȬ

suranceȱcompanyȱrefusedȱtoȱpay.ȱTheirȱrefusalȱwasȱchallengedȱinȱcourtȱunderȱ

theȱ“contractȱofȱadhesion”ȱtheory.ȱWillȱthisȱtheoryȱbeȱsuccessfulȱhere?ȱExplain.ȱ

[Jonesȱv.ȱCrownȱLife,ȱ150ȱCal.ȱRptr.ȱ375ȱ(Calif.ȱCt.ȱApp.ȱ1978)]ȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-67

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—2ȱRETEACHȱ

Directions:ȱWriteȱtheȱcategoryȱnamesȱandȱtheȱavailableȱpointsȱinȱcolumnsȱonȱtheȱ

chalkboard.ȱReadȱtheȱclueȱasȱitsȱrespectiveȱcategoryȱandȱpointȱvalueȱisȱchosen.ȱEraseȱ

eachȱpointȱvalueȱasȱitȱisȱansweredȱcorrectly.ȱStudentsȱshouldȱanswerȱinȱtheȱformȱofȱaȱ

question.ȱForȱexample,ȱtheȱcorrectȱresponseȱtoȱtheȱfirstȱcategoryȱatȱ300ȱwouldȱbeȱ

“WhatȱisȱtheȱFederalȱFairȱCreditȱBillingȱAct?”ȱWhenȱaȱstudentȱanswersȱcorrectly,ȱ

giveȱthemȱcreditȱforȱtheȱpointsȱandȱletȱthemȱchooseȱtheȱnextȱclue.ȱIfȱaȱstudentȱanȬ

swersȱincorrectly,ȱsubtractȱtheȱnumberȱofȱpointsȱfromȱtheirȱscoreȱandȱletȱanotherȱ

studentȱchooseȱtheȱnextȱclue.ȱ

CreditȱSystemȱ

AbuseȱLawsȱ

CreditȱCardsȱ

Miscellaneousȱ

100ȱ100ȱ100ȱ

200ȱ200ȱ200ȱ

Cluesȱtoȱbeȱreadȱtoȱstudents:ȱ

CreditȱSystemȱAbuseȱLawsȱ

100—Aȱlawȱthatȱmakesȱitȱunlawfulȱforȱanyȱcreditorȱtoȱdiscriminateȱonȱtheȱbasisȱofȱsexȱorȱ

maritalȱstatusȱȱ (FederalȱEqualȱCreditȱOpportunityȱAct)ȱ

200—Aȱlawȱthatȱmakesȱabusiveȱandȱdeceptiveȱdebtȱcollectionȱillegalȱȱ

CreditȱCardsȱ

100—AnȱexampleȱofȱanȱallȬpurposeȱcreditȱcardȱȱ (MasterCard,ȱVisa,ȱDiscover,ȱetc.)ȱ

Miscellaneousȱ

100—APRȱisȱanȱabbreviationȱforȱtheseȱwordsȱȱ (annualȱpercentageȱrate)ȱ

200—Totalȱaddedȱcostȱwhenȱoneȱpaysȱinȱinstallmentsȱforȱgoodsȱorȱservicesȱȱ (financeȱcharge)ȱ

7-68 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—2ȱENRICHMENTȱ

Asȱyouȱlearnedȱinȱthisȱlesson,ȱtheȱfederalȱTruthȱinȱLendingȱActȱ(partȱofȱtheȱConȬ

sumerȱCreditȱProtectionȱAct)ȱwasȱdesignedȱtoȱprotectȱconsumersȱwhenȱtheyȱbecomeȱ

debtors.ȱThisȱlawȱrequiresȱcompleteȱandȱclearȱdisclosureȱofȱloanȱtermsȱandȱrequiresȱ

creditorsȱtoȱmakeȱaȱfullȱdisclosureȱofȱinterestȱandȱfinanceȱchargesȱwheneverȱtheȱconȬ

sumerȱloanȱisȱrepayableȱinȱfourȱorȱmoreȱinstallmentsȱorȱcarriesȱaȱfinanceȱcharge.ȱ

Findȱaȱfamilyȱmemberȱorȱfriendȱwhoȱhasȱobtainedȱsomeȱsortȱofȱgoodsȱorȱservicesȱonȱ

creditȱandȱisȱpayingȱorȱhasȱpaidȱforȱtheseȱgoodsȱorȱservicesȱusingȱanȱinstallmentȱ

plan.ȱTogetherȱwithȱthisȱindividual,ȱreviewȱtheȱloanȱcontract,ȱandȱanswerȱtheȱfolȬ

lowingȱquestionsȱtoȱseeȱhowȱtheȱcompanyȱfullyȱdisclosesȱallȱtermsȱandȱchargesȱasȱ

requiredȱbyȱlaw.ȱ

1.ȱWhatȱisȱtheȱmonthlyȱinterestȱrate?ȱTheȱannualȱpercentageȱrateȱ(APR)?ȱ

2.ȱWhatȱisȱtheȱcashȱpriceȱofȱtheȱitem?ȱ

3.ȱWhatȱamountȱofȱmoneyȱwasȱprovidedȱasȱaȱdownȱpayment?ȱWasȱthereȱaȱtradeȬinȱ

allowance?ȱIfȱso,ȱhowȱmuchȱwasȱtheȱallowance?ȱ

4.ȱWhatȱotherȱfinanceȱchargesȱareȱlistedȱinȱtheȱcontractȱ(e.g.,ȱlateȱfees)?ȱ

5.ȱWhatȱwasȱtheȱtotalȱamountȱfinanced?ȱ

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—3ȱQUIZȱ

LegalȱConceptsȱ

Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ

whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ

Answersȱ

1.ȱBankruptcyȱlawȱprotectsȱonlyȱcreditors.ȱ1.ȱ______ ȱ

2.ȱChapterȱ11ȱbankruptcyȱlawȱinvolvesȱtheȱsaleȱforȱcashȱofȱtheȱȱ 2.ȱ______ ȱ

nonexemptȱpropertyȱofȱtheȱdebtorȱandȱtheȱdistributionȱofȱtheȱȱ

proceedsȱtoȱcreditors.ȱ

3.ȱChapterȱ13ȱreliefȱisȱavailableȱonlyȱtoȱindividualsȱwhoȱhaveȱȱ 3.ȱ______ ȱ

regularȱincome.ȱ

4.ȱInȱeitherȱvoluntaryȱorȱinvoluntaryȱbankruptcyȱproceedings,ȱȱ 4.ȱȱ ______ ȱ

ȱtheȱcreditorȱmust,ȱunderȱoath,ȱfileȱcertainȱinformationȱwithȱȱ

ȱtheȱcourt.ȱȱ

5.ȱChapterȱ12ȱreliefȱappliesȱonlyȱtoȱfamilyȱfarmȱowners.ȱ5.ȱ______ ȱ

7.ȱAȱpersonȱwhoȱowesȱ$20,000ȱorȱmoreȱtoȱaȱsingleȱpetitioningȱȱ 7.ȱ______ ȱ

unsecuredȱcreditorȱandȱisȱunableȱtoȱpayȱtheȱdebtsȱwhenȱtheyȱcomeȱȱ

dueȱmayȱbeȱforcedȱintoȱinvoluntaryȱbankruptcy.ȱ

8.ȱAlimonyȱandȱchildȱsupportȱpaymentsȱcannotȱbeȱdischargedȱȱ 8.ȱ______ ȱ

byȱbankruptcy.ȱ

9.ȱStudentȱloansȱowedȱtoȱtheȱgovernmentȱcanȱbeȱdischargedȱȱ 9.ȱ______ ȱ

byȱbankruptcy.ȱ

10.ȱSecuredȱcreditorsȱareȱtheȱfirstȱtoȱbeȱpaidȱwithȱtheȱproceedsȱȱ 10.ȱ______ ȱ

fromȱaȱliquidation.ȱ

LegalȱApplicationsȱ

11.ȱBobbyȱCowellȱownedȱaȱconstructionȱcompanyȱthatȱbuiltȱcustomȱhomes.ȱHeȱwasȱ

forcedȱtoȱfileȱforȱaȱChapterȱ11ȱbankruptcy.ȱHeȱownsȱ$8,000ȱworthȱofȱcarpentryȱ

tools.ȱWhatȱvalue,ȱifȱany,ȱofȱBobby’sȱtoolsȱcanȱbeȱseizedȱbyȱhisȱcreditors?ȱExplainȱ

12.ȱShawnȱOrndoffȱhasȱbeenȱforcedȱintoȱinvoluntaryȱbankruptcy.ȱHisȱunpaidȱdebtsȱ

includeȱ$1,200ȱinȱfederalȱincomeȱtaxes,ȱ$25,000ȱinȱstudentȱloansȱfromȱaȱnonprofitȱ

university,ȱ$5,000ȱinȱcreditȱcardȱloans,ȱandȱaȱcarȱloanȱforȱ$1,500.ȱWhichȱofȱtheseȱ

debtsȱwillȱnotȱbeȱdischargedȱbyȱShawn’sȱbankruptcy?ȱExplainȱyourȱanswer.ȱ

7-70 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—3ȱPRACTICEȱACTIVITYȱ

Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ

spaceȱisȱneededȱforȱanswers.ȱ

1.ȱBrittanyȱGricherryȱMurrayȱwasȱsevenȱyearsȱoldȱwhenȱsheȱfiledȱforȱbankruptcyȱ

protection.ȱBrittany’sȱpetitionȱwasȱfiledȱbyȱherȱmotherȱonȱherȱbehalf.ȱBrittanyȱ

maintainȱpaymentsȱonȱtheȱhouse.ȱBoatman’sȱdidȱnotȱobjectȱtoȱthisȱplan,ȱbutȱtheȱ

trusteeȱobjectedȱonȱtheȱgroundȱthatȱBrittany’sȱparentȱlackedȱauthorityȱtoȱfileȱaȱ

Chapterȱ13ȱbankruptcyȱpetitionȱforȱaȱminor.ȱCanȱBrittanyȱfileȱbankruptcyȱatȱsevȬ

enȱyearsȱold?ȱExplain.ȱ[InȱreȱMurray,ȱ199ȱB.R.ȱ165ȱ(U.S.ȱBrptcyȱCt.ȱTenn.ȱ1996)]ȱ

2.ȱTheȱbankruptcyȱcourtȱorderedȱtheȱSocialȱSecurityȱAdministrationȱtoȱpayȱallȱorȱ

someȱofȱsevenȱdebtors’ȱbenefitsȱtoȱaȱbankruptcyȱtrustee.ȱTheȱSocialȱSecurityȱActȱ

prohibitsȱtheȱassignmentȱofȱbenefits.ȱCanȱtheȱBankruptcyȱCodeȱoverrideȱthisȱSoȬ

cialȱSecurityȱAct’sȱprohibition?ȱExplain.ȱ[InȱreȱBuren,ȱ725ȱF.ȱ2dȱ1980ȱ(6thȱCir.ȱ

1984)]ȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-71

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—3ȱRETEACHȱ

Directions:ȱȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–7ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ

toȱQuestionȱ8ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ

ȱȱȱ

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ8.ȱ

1.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱ__ȱ__ȱȱȱ

3.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ__ȱ

4.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ

5ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱȱ

6.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ

7.ȱȱȱȱȱȱȱȱȱȱȱȱ__ȱ__ȱ__ȱ__ȱ__ȱȱ__ȱ__ȱ__ȱ__ȱ__ȱ

ȱȱ

1.ȱSomethingȱowedȱtoȱtheȱfederalȱgovernmentȱthatȱcannotȱbeȱdischargedȱthroughȱ

bankruptcyȱ

2.ȱDebtor’sȱpropertyȱthatȱcannotȱbeȱseizedȱbyȱcreditorsȱ

3.ȱTypeȱofȱbusinessȱthatȱmightȱfileȱforȱChapterȱ11ȱreorganizationȱ

4.ȱTypeȱofȱbankruptcyȱthatȱanyȱpersonȱorȱbusinessȱmayȱrequestȱ

5.ȱChapterȱofȱbankruptcyȱthatȱisȱavailableȱonlyȱtoȱindividualsȱwhoȱhaveȱregularȱ

incomeȱ

7.ȱThisȱhappensȱonceȱtheȱdebtor’sȱassetsȱareȱbroughtȱunderȱtheȱtrustee’sȱcontrolȱ

7-72 Chapter 33 Creditors, Debtors, and Bankruptcy

STUDENT _______________________________________ CLASS _______________________ DATE _________

ȱLESSONȱ33—3ȱENRICHMENTȱ

Theȱfocusȱofȱthisȱlessonȱwasȱonȱbankruptcy.ȱBankruptcyȱlawȱprotectsȱbothȱtheȱdebtȬ

ors—inȱgivingȱthemȱaȱnewȱeconomicȱstart,ȱfreeȱfromȱmostȱcreditors’ȱclaims—andȱ

theȱcreditors—byȱsettingȱupȱaȱframeworkȱtoȱgiveȱthemȱaȱfairȱtreatmentȱinȱtheirȱcomȬ

petitionȱforȱtheȱdebtor’sȱassets.ȱThereȱareȱfourȱtypesȱofȱbankruptcy:ȱChapterȱ7ȱliquiȬ

dationȱorȱ“straightȱbankruptcy,”ȱChapterȱ11ȱreorganization,ȱtheȱChapterȱ13ȱexȬ

tendedȱtimeȱpaymentȱplan,ȱandȱtheȱChapterȱ12ȱplanȱforȱfamilyȱfarmȱowners.ȱArtiȬ

clesȱaboutȱindividuals,ȱbusinesses,ȱorȱotherȱassociationsȱfilingȱforȱbankruptcyȱareȱ

oftenȱprintedȱinȱtheȱbusinessȱsectionȱofȱtheȱnewspaper.ȱResearchȱnewspapers,ȱperiȬ

odicals,ȱorȱInternetȱarticlesȱorȱinterviewȱaȱbankruptcyȱlawyerȱtoȱfindȱspecificȱexamȬ

plesȱforȱeachȱofȱtheȱfourȱtypesȱofȱbankruptcy.ȱInȱtheȱspacesȱprovidedȱbelow,ȱdetailȱ

eachȱcaseȱandȱindicateȱwhyȱtheȱindividual,ȱbusiness,ȱorȱassociationȱoptedȱforȱthatȱ

particularȱtypeȱofȱbankruptcyȱandȱwhetherȱtheȱbankruptcyȱwasȱvoluntaryȱorȱinvolȬ

untary.ȱ

1.ȱChapterȱ7ȱ

3.ȱChapterȱ13ȱ

4.ȱChapterȱ12ȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-73

STUDENT _______________________________________ CLASS _______________________ DATE _________

TESTȱ

CHAPTERȱ33

SECTION I—IDENTIFY LEGAL TERMS

Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ

whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱAnswersȱ

ȱȱ1.ȱPledgedȱpropertyȱmayȱbeȱrepledgedȱtoȱaȱthirdȱpartyȱonȱtermsȱthatȱ

doȱnotȱpreventȱtheȱpledgorȱfromȱgettingȱtheȱpropertyȱbackȱwhenȱ

theȱdebtȱisȱpaid.ȱ

ȱȱ1.ȱ_____ȱ

ȱȱ2.ȱAȱpawnbrokerȱhasȱtheȱrightȱtoȱgarnishȱone’sȱwages.ȱȱȱ2.ȱ_____ȱ

ȱȱ3.ȱInȱbankruptcyȱcourtȱtheȱpersonȱwhoȱborrowedȱmoneyȱheȱorȱsheȱ

cannotȱrepayȱisȱcalledȱtheȱmortgagor,ȱandȱtheȱlenderȱisȱcalledȱtheȱ

mortgagee.ȱ

ȱȱ3.ȱ_____ȱ

ȱȱ4.ȱUsuallyȱusuryȱlawsȱthatȱsetȱmaximumȱinterestȱratesȱapplyȱonlyȱtoȱ

loansȱofȱmoney.ȱ

ȱȱ4.ȱ_____ȱ

ȱȱ5.ȱUnconscionableȱcontractsȱmustȱbeȱcriminal.ȱȱȱ5.ȱ_____ȱ

ȱȱ6.ȱInȱsomeȱstates,ȱaȱdebtorȱisȱnotȱrequiredȱtoȱpayȱaȱdebtȱunlessȱaȱreȬ

ceiptȱisȱgiven.ȱ

ȱȱ6.ȱ_____ȱ

ȱȱ7.ȱUsingȱcreditȱcardsȱisȱmoreȱconvenientȱandȱmoreȱeconomicalȱthanȱ

usingȱchecks.ȱ

ȱȱ7.ȱ_____ȱ

ȱȱ8.ȱBankruptcyȱlawsȱprotectȱonlyȱtheȱdebtors.ȱȱȱ8.ȱ_____ȱ

ȱȱ9.ȱȱ Deedsȱofȱtrustȱtransferȱownershipȱofȱaȱpropertyȱtoȱtheȱstate.ȱȱȱ9.ȱȱ_____ȱ

10.ȱTheȱlawȱprovidesȱanȱorderȱofȱpriorityȱforȱpayoutȱofȱtheȱproceedsȱȱ

ofȱaȱliquidation.ȱ

10.ȱ_____ȱ

SECTION II—THINK CRITICALLY ABOUT LEGAL CONCEPTS

Directions:ȱInȱtheȱAnswersȱcolumnȱatȱtheȱrightȱofȱeachȱstatement,ȱwriteȱtheȱletterȱthatȱ

representsȱtheȱword,ȱorȱgroupȱofȱwords,ȱthatȱcorrectlyȱcompletesȱtheȱstatement.ȱ

ȱȱȱȱȱȱȱȱȱȱȱ Answersȱ

11.ȱInȱcaseȱofȱdefault,ȱaȱlienȱdoesȱnotȱgiveȱtheȱcreditorȱtheȱrightȱtoȱ(a)ȱ

attachȱtheȱdebtor’sȱwages,ȱ(b)ȱrepossessȱtheȱproperty,ȱ(c)ȱseizeȱ

controlȱofȱtheȱproperty,ȱ(d)ȱsellȱtheȱpropertyȱ

11.ȱ_____ȱ

12.ȱȱ AȱpersonȱwhoȱhasȱnotȱbeenȱpaidȱforȱlaborȱtoȱbuildȱaȱhomeȱisȱalȬ

lowedȱtoȱfileȱaȱlegalȱclaimȱagainstȱtheȱpropertyȱunderȱ(a)ȱanȱartiȬ

san’sȱlien,ȱ(b)ȱaȱmechanic’sȱlien,ȱ(c)ȱaȱpawn,ȱ(d)ȱaȱpledgeȱ

12.ȱ______ȱ

13.ȱȱ Aȱpersonȱwhoȱhasȱnotȱbeenȱpaidȱforȱservicesȱisȱallowedȱtoȱretainȱ

possessionȱofȱtheȱrepairedȱorȱdeliveredȱpropertyȱuntilȱpaymentȱisȱ

madeȱunderȱ(a)ȱanȱartisan’sȱlien,ȱ(b)ȱaȱmechanic’sȱlien,ȱ(c)ȱaȱ

pawn,ȱ(d)ȱaȱpledgeȱ

13.ȱ______ȱ

14.ȱAnyȱcreditorȱwhoȱwillfullyȱandȱknowinglyȱviolatesȱtheȱTruthȱinȱ

LendingȱActȱ(a)ȱmayȱbeȱfined,ȱimprisoned,ȱorȱboth,ȱ(b)ȱmustȱpayȱ

theȱdebtorȱtwiceȱtheȱfinanceȱchargeȱplusȱcourtȱcostsȱandȱattorȬ

ney’sȱfees,ȱ(c)ȱbothȱaȱandȱb,ȱ(d)ȱnoneȱofȱtheseȱ

14.ȱ______ȱ

15.ȱWhichȱactȱpermitsȱmerchantsȱtoȱofferȱdiscountsȱtoȱcustomersȱ

whoȱpayȱcashȱinsteadȱofȱusingȱcreditȱcards?ȱ(a)ȱFederalȱFairȱCreȬ

15.ȱ______ȱ

16.ȱTheȱlossȱorȱtheftȱofȱaȱcreditȱcardȱ(a)ȱneedȱnotȱbeȱreported,ȱȱȱȱȱȱȱȱȱȱ(b)ȱ

leavesȱtheȱcardholderȱliableȱforȱunauthorizedȱuse,ȱ(c)ȱraisesȱtheȱ

interestȱrateȱonȱtheȱcard,ȱ(d)ȱnoneȱofȱtheseȱ

16.ȱ______ȱ

17.ȱȱ Theȱbankruptcyȱlawȱthatȱinvolvesȱliquidationȱofȱnonexemptȱ

propertyȱisȱ(a)ȱChapterȱ7,ȱ(b)ȱChapterȱ11,ȱ(c)ȱChapterȱ12,ȱȱȱȱȱȱȱȱȱȱȱȱ(d)ȱ

Chapterȱ13ȱ

17.ȱ______ȱ

18.ȱȱ AȱpledgeȱisȱaȱsecuredȱtransactionȱinȱwhichȱtheȱcreditorȱhasȱposȬ

sessionȱofȱtheȱpledgor’sȱ(a)ȱcopyright,ȱ(b)ȱtrademark,ȱ(c)ȱbusinessȱ

licenses,ȱ(d)ȱcollateralȱ

18.ȱ______ȱ

19.ȱȱ Certainȱtypesȱofȱclaimsȱthatȱcannotȱbeȱdischargedȱbyȱbankruptcyȱ

mightȱincludeȱ(a)ȱalimonyȱandȱchildȱsupport,ȱ(b)ȱjudgmentsȱreȬ

sultingȱfromȱdrivingȱwhileȱintoxicated,ȱ(c)ȱstudentȱloansȱowedȱtoȱ

theȱgovernment,ȱ(d)ȱallȱofȱtheseȱ

19.ȱ______ȱ

20.ȱȱ Theȱfirstȱtoȱbeȱpaidȱfromȱtheȱproceedsȱofȱliquidationȱwouldȱbeȱȱ(a)ȱ

administrativeȱexpense,ȱ(b)ȱcertainȱunpaidȱtaxes,ȱ(c)ȱsecuredȱ

creditors,ȱ(d)ȱunpaidȱwages,ȱsalaries,ȱandȱcommissionsȱ

20.ȱ______ȱ

Chapter 33 Creditors, Debtors, and Bankruptcy 7-75

SECTION III—APPLY LEGAL PRACTICES

21.ȱPaulȱhasȱbeenȱdivorcedȱforȱthreeȱyearsȱandȱisȱextremelyȱbitterȱaboutȱpayingȱaliȬ

mony.ȱHeȱpurposelyȱdidȱsloppyȱworkȱsoȱheȱwouldȱbeȱfiredȱand,ȱtherefore,ȱ

couldn’tȱpayȱtheȱalimony.ȱHeȱevenȱwentȱsoȱfarȱasȱtoȱdeclareȱChapterȱ7ȱbankȬ

ruptcy.ȱWillȱthisȱdischargeȱtheȱalimony?ȱExplainȱyourȱanswer.ȱ