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STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ33—1ȱQUIZȱ
LegalȱConceptsȱȱ
Directions:ȱInȱtheȱAnswersȱcolumn,ȱwriteȱtheȱletterȱfromȱColumnȱ1ȱthatȱrepresentsȱ
theȱwordȱorȱphraseȱthatȱmatchesȱtheȱstatementȱinȱColumnȱ2.ȱ
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
J
.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
ȱ
1.ȱWestȱPaintingȱwasȱaȱcorporationȱthatȱenteredȱintoȱaȱcontractȱwithȱZidellȱtoȱpaintȱ
aȱbarge.ȱTheȱtermsȱofȱpaymentȱwereȱsuchȱthatȱZidellȱwasȱtoȱpayȱWestȱinȱperiodicȱ
insteadȱowedȱWestȱ“earnings”ȱandȱthatȱ“earnings”ȱareȱnotȱsubjectȱtoȱgarnishȬ
ment.ȱWhoȱisȱcorrect?ȱExplain.ȱ[Zidellȱv.ȱWestȱPainting,ȱInc.,ȱ906ȱP.ȱ2dȱ809ȱ(Ore.ȱ
1995)]ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
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
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
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
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱLawsȱinvolvingȱthirdȱpartiesȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱLawsȱallowingȱgarnishmentȱofȱwagesȱ
Chapter 33 Creditors, Debtors, and Bankruptcy 7-65
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ33—2ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱPlaceȱaȱYȱforȱYesȱorȱanȱNȱforȱNoȱinȱtheȱAnswersȱcolumnȱtoȱindicateȱtheȱ
correctȱanswer.ȱ
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
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
ȱ
ȱ
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
ȱ
CreditȱSystemȱ
AbuseȱLawsȱ
ȱ
CreditȱCardsȱ
ȱ
Miscellaneousȱ
100ȱ100ȱ100ȱ
200ȱ200ȱ200ȱ
Cluesȱtoȱbeȱreadȱtoȱstudents:ȱ
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
ȱ
1.ȱWhatȱisȱtheȱmonthlyȱinterestȱrate?ȱTheȱannualȱpercentageȱrateȱ(APR)?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱWhatȱisȱtheȱcashȱpriceȱofȱtheȱitem?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱWhatȱamountȱofȱmoneyȱwasȱprovidedȱasȱaȱdownȱpayment?ȱWasȱthereȱaȱtradeȬinȱ
allowance?ȱIfȱso,ȱhowȱmuchȱwasȱtheȱallowance?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱWhatȱotherȱfinanceȱchargesȱareȱlistedȱinȱtheȱcontractȱ(e.g.,ȱlateȱfees)?ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
5.ȱWhatȱwasȱtheȱtotalȱamountȱfinanced?ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ33—3ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ
whetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱ
ȱ
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
ȱ
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
ȱ
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
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
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
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
ȱ
Directions:ȱȱWriteȱtheȱanswersȱtoȱQuestionsȱ1–7ȱonȱtheȱblanksȱprovided.ȱTheȱanswerȱ
toȱQuestionȱ8ȱshouldȱappearȱinȱtheȱverticalȱboxes.ȱ
ȱȱȱ
ȱ
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
ȱ
ȱ
ȱ
1.ȱSomethingȱowedȱtoȱtheȱfederalȱgovernmentȱthatȱcannotȱbeȱdischargedȱthroughȱ
bankruptcyȱ
2.ȱDebtor’sȱpropertyȱthatȱcannotȱbeȱseizedȱbyȱcreditorsȱ
3.ȱTypeȱofȱbusinessȱthatȱmightȱfileȱforȱChapterȱ11ȱreorganizationȱ
4.ȱTypeȱofȱbankruptcyȱthatȱanyȱpersonȱorȱbusinessȱmayȱrequestȱ
5.ȱChapterȱofȱbankruptcyȱthatȱisȱavailableȱonlyȱtoȱindividualsȱwhoȱhaveȱregularȱ
incomeȱ
7.ȱThisȱhappensȱonceȱtheȱdebtor’sȱassetsȱareȱbroughtȱunderȱtheȱtrustee’sȱcontrolȱ
ȱ
ȱ
ȱ
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
ȱ
1.ȱChapterȱ7ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱChapterȱ13ȱ
ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱChapterȱ12ȱ
Chapter 33 Creditors, Debtors, and Bankruptcy 7-73
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱ
ȱ
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
ȱ
