Q&A Hero

Q: A court awards a judgment to Alice, who is the creditor, against Ada, who is the debtor. After the judgment, Alice requests a court order to seize Ada's property to ensure that the judgment will be collectible. This is a. a judicial lien. b. a writ of attachment. c. a writ of execution. d. a violation of most state laws.

Q: Friendly Credit Corporation (FCC) believes that Gary may dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment. FCC may ask a court to issue a writ of a. attachment. b. contribution. c. execution. d. redemption.

Q: Ronald's debt to Greg is past due. Ronald obtains a judgment against Greg to collect the debt, but Greg will not pay. Ronald requests a writ of execution. The property that is seized under the writ of execution must be a. in Ronald's possession. b. in Greg's possession. c. in the possession of Greg's employer or other third party. d. located within the court's geographic jurisdiction.

Q: Jessie's debt to Kayla is past due. Kayla brings a legal action against Jessie to collect the debt. Kayla asks the court to order Liberty Bank, in which Jessie has an account, to pay a portion of the funds to Kayla. This is a request for a. a writ of execution. b. an order of garnishment. c. an order that would violate most state laws. d. a composition agreement.

Q: Oliver borrows money from Peerless Loan Company. For Peerless to obtain a writ of execution, Oliver must a. be unable or refuse to pay the amount of a judgment. b. be unable to redeem Oliver's exempt property. c. notify Imprints in writing (in a "writ") of his intent. d. surrender possession of his property to a court.

Q: Helene's debt to Imprints Printers is past due. Imprints obtains a judgment against Helene, but she refuses to pay it. Imprints asks the court for an order that directs the sheriff to seize and sell any of Helene's nonexempt real or personal property that is within the court's geographic jurisdiction. This is a request for a. a writ of execution. b. a composition agreement. c. an order that would violate most state laws. d. an order of garnishment.

Q: Sasha's debt to Tully is past due. Tully brings a legal action against Sasha to collect the debt. To ensure that a judgment in Tully's favor will be collectible, he asks the court to order the seizure of Sasha's property. This is a request for a. a contract of suretyship. b. an order that would violate most state laws. c. a writ of attachment. d. an order of receivership.

Q: Oscar refuses to pay Petra $500 in cash on their contract to repair Oscar's washing machine, which Petra still possesses at her repair shop. Petra's lien on the machine will terminate a. if Petra continues to maintain possession. b. if Petra does not file a written notice of lien within thirty days. c. if Petra voluntarily surrenders possession. d. within thirty days.

Q: Michael contracts with Jill to fix the brakes on her Honda Civic. Jill leaves her car with Michael, but refuses to pay when the work is done. Michael refuses to return the car until she pays. Michael's lien on Jill's car will end a. in thirty days. b. in sixty days. c. when Michael voluntarily surrenders possession of the car. d. when Jill obtains a court order requiring Michael to return the car.

Q: Portia owes Bon $500 on their roof repair contract, but refuses to pay. To collect, Bon files a mechanic's lien. Under a mechanic's lien, security for the debt is represented by a. Portia's personal property. b. Portia's real estate. c. the $500 owed under the contract. d. the contract.

Q: Builders Construction Company performs a contract with Christina to add a sun porch to her house, but she does not pay. In most states, Builders Construction could create a lien and place it on Christina's property by filing a. a creditor's composition agreement. b. a writ of attachment. c. a writ of execution. d. a written notice of lien.

Q: Francis performs a contract with Genie to add a garage to Genie's property, but Genie does not pay. Francis can file a lien on Genie's property if, from the last date labor or materials were provided, he acts a. immediately. b. within 60 to 120 days. c. within two years. d. within a reasonable time.

Q: Kendall performs a contract with Lainie to add a covered porch and a pool deck to Lainie's house, but Lainie does not pay. Kendall notifies Lainie that the property will be sold to satisfy the debt. This is a. a judicial lien. b. a mechanic's lien. c. an artisan's lien. d. a violation of most state laws.

Q: Portia owes Bon $500 on their contract, but refuses to pay. To collect, Bon files a mechanic's lien, under which security for the debt is represented by a. Portia's personal property. b. Portia's real estate. c. the $500 owed under the contract. d. the contract.

Q: Custom Cabinets & Carpentry Company has a claim against Duane's property to satisfy a debt that takes priority over other claims against the same property. This is a. a lien. b. a violation of most state laws. c. a composition agreement. d. a contract of suretyship.

Q: A debtor's vehicle is never exempt from satisfaction of a judgment debt.

Q: In a few states, statutes allow the homestead exemption only if the judgment debtor has a family.

Q: A homestead exemption allows a debtor to subtract the value of the family home from the amount of a debt.

Q: When a surety or guarantor pays a debt owed to a creditor, he or she acquires any right that the creditor had against the debtor.

Q: A surety cannot assert the principal debtor's bankruptcy as a defense to avoid liability on the debtor's obligation.

Q: If a creditor surrenders collateral to the debtor without the consent of the guarantor, this can reduce the obligation of the guarantor.

Q: A surety can never assert fraud as a defense.

Q: A surety can assert the debtor's bankruptcy as a defense.

Q: A material change in a loan contract between a creditor and a debtor discharges a surety only to the extent that the surety suffers a loss.

Q: A guaranty contract must always be in writing to be enforceable.

Q: A guarantor can be required to pay an obligation only after the principal debtor defaults.

Q: A guarantor is secondarily liable on an obligation.

Q: A creditor must exhaust all legal remedies against the principal debtor before holding the surety responsible for payment.

Q: Creditors can agree with a debtor to discharge the debtor's debts on payment of a sum less than that owed.

Q: A creditor's composition agreement may be entirely enforceable.

Q: In some states, a judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.

Q: A surety is primarily liable for the debt of a principal.

Q: In a suretyship relationship, a third person's credit becomes the security for a debt.

Q: There is no limit to the amount that can be taken from a debtor's weekly take-home pay through garnishment.

Q: Federal law governs garnishment actions.

Q: A surety can be required to pay an obligation only after the principal debtor defaults and usually only after the creditor has made an attempt to collect from the debtor.

Q: A writ of execution applies to a debtor's nonexempt real or personal property wherever located.

Q: 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.

Q: An attachment is a court-ordered seizure and taking into custody of property before a judgment is obtained on a past-due debt.

Q: A default occurs when a debtor fails to pay a creditor as promised.

Q: Once a writ of execution has been issued, the debtor cannot pay the judgment and redeem the property until after a sale has taken place.

Q: A writ of execution is a writ that puts in force a court decree or judgment.

Q: To use attachment as a remedy, a creditor must have an enforceable right to payment of the debt.

Q: An artisan's lien is effective only if a creditor has possession of the property.

Q: An artisan's lien is a security device created at statutory law through which a creditor can recover payment for labor and materials used to increase the value of real property.

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

Q: A mechanic's lien is possessory.

Q: A mechanic's lien can be enforced to obtain payment for work that adds value to real property.

Q: Liens usually do not take priority over other claims against the same property.

Q: A lien is an encumbrance on property to satisfy a debt or protect a claim for the payment of a debt.

Q: Abner owes Borrowers Bank $15,000 but refuses to pay. Borrowers wants to obtain a garnishment order and serve it on Abner's employer, Caf de Jeuner. What is the procedure for obtaining a garnishment order? Is one order enough to garnish all of Abner's wages for each pay period until the debt is paid? Can Abner's employer dismiss him due to the garnishment?

Q: A pipe in Gert's house springs a leak. Gert contracts with Holly's Plumbing & Construction Company to repair the pipe and fix the damage to Gert's house. Gert pays 10 percent of the price in advance. Holly's does the work, but Gert refuses to pay the rest of the price. What can Holly's do, and how is it done?

Q: Dana defaults on a debt to Rachel. Rachel will NOT be able to recover the debt from a. the sale of Dana's prize winning pet dog. b. the sale of Dana's investments in stocks. c. Dana's wages. d. Dana's lottery winnings.

Q: Daphne defaults on a debt to Country Loan Corporation (CLC). As a creditor, CLC can place liens on all of Daphne's property except a. motor vehicles used to commute to work. b. stock in various corporations. c. items that the debtor selects. d. vacant commercial property.

Q: 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. Other property Mary may own that may be exempt from satisfaction of judgment debts includes a. any property that Mary wishes to exempt. b. investments that Mary has made in her family's businesses. c. recreational vehicles that Mary uses on weekends. d. tools that Mary uses in her trade.

Q: 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. Nina may recover a. $0. b. $30,000. c. $50,000. d. $60,000.

Q: 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. Mary will receive a. $0. b. $30,000. c. $50,000. d. $60,000.

Q: 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. 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.

Q: Bertram, Chaka, and Dougal are co-sureties of Erica's debt to Finance Loan Company. Bertram pays Erica's entire debt. Bertram's right to seek proportionate payments from Chaka and Dougal is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Q: Raoul is a surety for Suzu's loan from Turnkey Credit, Inc. Raoul's right to "step into the shoes" of Turnkey, after paying Suzu's debt, and exercise any of the Turnkey's rights against Suzu is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Q: Efrem owns Fans & Players, a retail sporting goods shop. When Great Hill Lodge, a new ski resort, is built in the area, Efrem decides to expand and borrows a large sum from Hometown Bank. The bank takes a security interest in Efrem's present inventory and any after-acquired inventory as collateral for the loan. The bank properly perfects the security interest by filing a financing statement. Efrem's business is profitable, and he begins doubling his inventory. A year later, an avalanche destroys the ski slope and lodge. Efrem's business takes a turn for the worse, and he defaults on his debt to the bank. The bank seeks possession of his entire inventory, even though the inventory is twice as large as it was when the loan was made. Efrem claims that the bank has rights to only half of his inventory. Is Efrem correct? Explain.

Q: Sara needs $1,500 to buy textbooks and other school supplies. Tomas agrees to loan Sara $1,500, accepting as collateral Sara's car. They put their agreement in writing and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security interest? How can Tomas let other creditors know of his interest in the car?

Q: Hal's Hardware store defaults on a debt to Intrastate Bank, which takes possession of the collateral securing the debt. Intrastate sells the collateral. The proceeds from the sale are applied first to a. Hal's debt to Intrastate. b. Hal's debts to other creditors. c. Intrastate's fees for the sale. d. payments Hal's made on the debt to Intrastate.

Q: Sweetwater Caf defaults on debts to Town & Country Bank and Uno Loan Company. Town & Country perfected its security interest before Uno. Town & Country takes possession of the collateral in which it has a security interest. On a sale of the collateral, the proceeds will be applied first to a. Sweetwater's previous payments on the debts. b. Sweetwater's unpaid payments on the debts. c. the balance of Sweetwater's debt to Town & Country. d. the balance of Sweetwater's debt to Uno.

Q: Elias repays his debt, incurred to buy consumer goods, to Fidelity Bank and immediately files a written request for a termination statement. Fidelity a. must comply within one month of receipt of the letter. b. must comply within twenty days of receipt of the letter. c. must refund $500 to Elias. d. need not comply.

Q: 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 a. a bank. b. a buyer in the ordinary course of business. c. a subsequent lien creditor. d. a trustee in bankruptcy.

Q: Idle Investments, Inc., and Harbor Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by a. the amount of the claim. b. the custom in the trade. c. the time of perfection. d. the time the security agreement was signed.

Q: General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is a. GLC. b. Helpful and Interstate proportionately. c. Helpful only. d. Interstate only.

Q: General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans. Suppose that Helpful perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be a. GLC. b. Helpful and Interstate proportionately. c. Helpful only. d. Interstate only.

Q: Lena borrows from Mac and Nicol, using the same farm equipment as collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is a. Lena. b. Mac and Nicol, in proportion to Lena's debt to each. c. Mac only. d. Nicol only.

Q: Pete borrows $5,000 from Willy in a secured transaction using Pete's BMW as collateral. Pete then borrows $7,000 from Janet using the same car as collateral. Neither Willy nor Janet perfects their security interests. Pete defaults on the loans. The party with priority is a. Willy, because his interest was the first to attach. b. Janet, because Pete owes her more money. c. Janet, because her interest was the second to attach. d. Willy, because Pete owes him less money.

Q: Middling Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is a. a first-in-time rule. b. a floating lien. c. a funds guaranty. d. in violation of secured transactions law.

Q: Joan borrows money from Jake under a security agreement. After borrowing the money, Joan buys a new kayak. The kayak is considered a. a floating lien. b. after-acquired property. c. a future advance. d. proceeds.

Q: Everyday Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. Everyday has a security interest in the new inventory a. if the security agreement included an after-acquired property clause. b. if Everyday has not yet filed a financing statement. c. if Glade bought the inventory with Everyday funds. d. under no circumstances.

Q: City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for a. one year. b. two years. c. five years. d. ten years.

Q: Valley Furniture Store sells household consumer goods on credit for which Valley files a financing statement to perfect a security interest in the goods. With the filing of subsequent continuation statements, the effectiveness of the statement can be continued a. indefinitely. b. for no longer than five years. c. for no more than six months. d. up to five years and six months.

Q: The payment of Paul's debt to Ryan is guaranteed by Paul's 2002 Honda Civic. Ryan filed the financing statement on July 1, 2012. If Ryan does nothing else, the financing statement will be effective until a. July 1, 2013. b. July 1, 2014. c. July 1, 2017. d. July 1, 2022.

Q: Saf-T Lenders, Inc., takes possession of Tiara's stock in Urgent Care Corporation to perfect Saf-T's security interest in the stock. This is a. after-acquired property. b. a pledge. c. a purchase-money security interest. d. a violation of most state laws.

Q: Corporate Bank wants to perfect its security interest in inventory owned by Outdoor Outfitters, Inc. Most likely, a financing statement should be filed with a. the bank manager. b. the county clerk. c. the U.S. Department of the Interior. d. the secretary of state.

Q: Angie borrows $20,000 from First Line Credit using a field of timber trees as collateral. To perfect its security interest, First Line Credit must file its financing statement with a. the county clerk. b. the mayor. c. the city counsel. d. the secretary of state.