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Q:
The rate of interest that courts impose on losing parties until they pay the winning parties is known as a(n):
A. variable rate.
B. order rate.
C. judgment rate.
D. fixed rate.
Q:
Marion purchased a digital camera, paying with a promissory note. The note stated that Marion promised to pay $300 (the purchase price of the camera) in 10 monthly installments of $30 plus interest. Payments are due on the first day of each month, starting in January 2010. The interest is to be calculated as "three percent over the Chase Manhattan Prime Rate." Is this instrument negotiable?
A. No, because the future prime rate is not known at the time of the making of the note.
B. No, because the note does not describe a fixed amount of money to be paid.
C. Yes, because the variable rate of interest is calculated by reference to an index.
D. Yes, because the future prime rate is known at the time of the making of the note.
Q:
Which of the following is nonnegotiable?
A. A note that does not state any other undertaking by the person promising to do any act in addition to the payment of money.
B. A draft payable "15 days after sight."
C. A note with a clause permitting the time for payment to be accelerated at the option of the maker.
D. A note that is payable "when the interest rate on 30-year treasury bonds reaches 10 percent."
Q:
An instrument payable on demand is:
A. not payable before the date of the instrument.
B. payable before the date of the instrument.
C. not payable after the date of the instrument.
D. nonnegotiable without a date.
Q:
Which of the following is true if an instrument is undated?
A. Its date is the date it is signed by the maker or the drawer.
B. Its date is the date it is issued by the maker or the drawer.
C. Its date is the date it is received by the payee.
D. The instrument is nonnegotiable if it is undated.
Q:
If the description of interest in the instrument does not allow the amount of interest to be ascertained, then interest is payable at the:
A. variable rate.
B. judgment rate.
C. order rate.
D. fixed rate.
Q:
Payments made with a credit card and payments made with a debit or ATM card are subject to:
A. both the federal law and the state law.
B. only federal laws.
C. only state laws.
D. only local laws.
Q:
Traveler's checks commonly require, as a condition to payment, a countersignature of a person whose specimen signature appears on the draft. Traveler's checks are:
A. voidable.
B. negotiable.
C. nonnegotiable.
D. unenforceable.
Q:
The Code determines negotiability at _____, so that indorsements do not affect the underlying negotiability of the instrument.
A. precompliance
B. abeyance
C. issuance
D. disaffirmance
Q:
The requirement that, to be negotiable, an instrument must promise or order payment of a fixed amount of money applies:
A. only to principal.
B. only to interest.
C. to both principal and interest together.
D. neither to principal nor interest.
Q:
Which of the following is a negotiable instrument?
A. "I owe you $100."
B. "I promise to repay the loan of $3,000 only if I succeed in my business."
C. "I promise to pay you the sum of $300 in the next week."
D. "Please pay the bearer the amount of $500."
Q:
Which of the following would be a nonnegotiable instrument?
A. "Payment is subject to the terms of a mortgage dated August 12, 2011."
B. A statement in the instrument that it was given in payment of last month's rent.
C. A statement in the instrument that it was given in payment of the purchase price of goods.
D. "This note is secured by a mortgage dated January 13, 2011."
Q:
A conditional indorsement:
A. destroys the negotiability of the instrument.
B. does not destroy the negotiability of an otherwise negotiable instrument.
C. validates the instrument.
D. does not destroy the negotiability of the instrument but invalidates it.
Q:
A check is NOT negotiable if it:
A. reads "Pay Kim Turner."
B. states that it is payable only on a certain condition.
C. is signed with a rubber-stamped signature.
D. is issued by a drawer who lacks capacity to contract.
Q:
A person creates a handwritten instrument in pencil on a piece of wrapping paper. The instrument is:
A. negotiable even though it is handwritten.
B. nonnegotiable because it is handwritten.
C. nonnegotiable since it is written on a piece of wrapping paper.
D. void.
Q:
To qualify as a negotiable instrument, an instrument in the form of a note must be signed by the:
A. payee.
B. drawee.
C. assignee.
D. maker.
Q:
Which of the following statements will cause an instrument to be nonnegotiable?
A. "Payment is subject to the terms of a mortgage dated August 30, 2005."
B. "Payment is secured by a mortgage dated August 30, 2005."
C. "Payment is in consideration of two months' rent."
D. "Payment to be made 30 days after date, for a note dated August 30, 2005."
Q:
Tim contracts with Home Dairy to deliver a bottle of milk to Tim's house every day. Home Dairy assigns Tim's contract to Mother Dairy. Tim is notified of the change and continues to get his daily bottle of milk. His contract is now with the new dairy. Mother Dairy is the:
A. assignee.
B. factor.
C. holder in due course.
D. assignor.
Q:
A holder in due course of a negotiable instrument takes the instrument free of all defenses to the instrument except those that concern its:
A. validity.
B. reliability.
C. adaptability.
D. collectibility.
Q:
A holder in due course is subject to the defense of _____ if the maker of a note wrote it under a threat of force.
A. fraudulent inducement
B. infancy
C. duress
D. breach of warranty
Q:
The _____ has adopted a regulation that alters the rights of a holder in due course in consumer purchase transactions.
A. Securities and Exchange Commission
B. Consumer Product Safety Commission
C. Bureau of Consumer Financial Protection
D. Federal Trade Commission
Q:
Three of the following render an instrument nonnegotiable; one does not affect negotiability. Which of the following does NOT affect negotiability?
A. A draft that says: "Pay to the order of Sue Smith once she repairs my computer."
B. An instrument that says only: "This confirms my $1,000 debt to Sue Smith."
C. A note that says: "Payment is conditional upon the terms of the mortgage between the parties dated June 1, 2000."
D. A notes that says: "This note is secured by the property described in the parties' mortgage of June 1, 2000."
Q:
A check drawn by a credit union on its account at a federally insured bank would be an example of a:
A. cashier's check.
B. teller's check.
C. counter check.
D. traveler's check.
Q:
A _____ check is a draft on which the drawer and drawee are the same bank (or branches of the same bank).
A. cashier's
B. teller's
C. certified
D. traveler's
Q:
A check or draft that one bank draws upon another bank is called a:
A. certified check.
B. cashier's check.
C. teller's check.
D. bearer check.
Q:
What is the term for an instrument containing both an acknowledgement by a bank that it has received money and a promise to repay money?
A. Commerce treaty
B. Articles of Organization
C. Certificate of Deposit
D. Escrow
Q:
If Viola owes Tina money, Tina may frame a document for the amount of the debt, naming Viola as drawee and herself or her bank as payee, and send the document to Viola's bank for payment. This document is a:
A. promissory note.
B. certificate of deposit.
C. draft.
D. bond.
Q:
Melissa Seles has a checking account at the Union Bank of New York. She goes to Home Depot and agrees to buy a room heater priced at $200. She writes a check to pay for it. The Union Bank of New York is the:
A. bearer.
B. drawer.
C. payee.
D. drawee.
Q:
Selena Johnson has a checking account at the Union Bank of New York. She goes to Home Depot and agrees to buy a room heater priced at $200. She writes a check to pay for it. Home Depot is the:
A. payer.
B. drawer.
C. payee.
D. drawee.
Q:
Shania Watson has a checking account at the Capital Bank of New York. She goes to Lowe's and agrees to buy an electric water heater priced at $700. She writes a check to pay for it. Shania is the _____ of the check.
A. payer
B. drawer
C. payee
D. drawee
Q:
The term commercial paper is defined as?
A. A contract for the payment of money.
B. An agreement between nations for the benefit of commerce.
C. A receipt of goods barter between businesses.
D. A warranty on good shipped in international commerce.
Q:
Jill takes a loan from a bank. She signs a standard-form note prepared by the bank. The note obligates Jill to pay to the bank the amount of the loan, plus interest. Jill is the:
A. maker of the note.
B. bearer of the note.
C. drawee of the note.
D. payee of the note.
Q:
Which of the following instruments defines an order directed to a certain person, namely a bank, to pay money from a person's account to a third person?
A. Check
B. Promissory note
C. Certificate of deposit
D. Draft
Q:
Joe writes a check payable to Advanced Autos. The check is drawn on his checking account with the Progressive Bank. The drawee on this check is:
A. Joe.
B. Progressive Bank.
C. Advanced Autos.
D. the Federal Reserve.
Q:
Checks and drafts are:
A. documents required as evidence for shipment of goods.
B. documents which detail the transaction between a seller and a buyer.
C. orders to another person to pay money to a third person.
D. promises to pay someone money.
Q:
An instrument can be made payable to two or more payees.
Q:
When there is a conflict on the amount on a check with the printed and the handwritten terms then the handwritten terms will prevails.
Q:
Susie Q, business manager for Pizza Uno, sends a check to Papa Bakery. On the check the computer writes TWO DOLLARS in the description line field and has $200.00 in the numeric field. Susie signed the check and did not notice the mistake. The bank should honor the check for $2.00.
Q:
A check payable to the order of cash is an example of bearer paper.
Q:
A typed or rubber stamped signature is sufficient if it is put on the instrument to validate it.
Q:
If an instrument is an order to pay, it must contain an unconditional order.
Q:
Under the Revised Article 3 of the UCC, the variable interest rate notes are not negotiable.
Q:
Instruments cannot be negotiable if they are payable in a foreign currency.
Q:
An instrument that is payable on the happening of some uncertain event is negotiable.
Q:
The Ace Corporation is involuntarily petitioned into a Chapter 7 bankruptcy on March 1, 1994. On January 10, 1994, Ace paid the Highstate Gas Company its $1,700 utility bill for natural gas supplied during December of 1993. Is this payment preferential? Why or why not?
Q:
Joe goes into bankruptcy under Chapter 7 and in due course all of his debts are discharged thereby. After the discharge is granted, Joe signs an agreement promising to repay one of those discharged debts. Joe's attorney certifies that Joe is able to pay the debt. Is Joe bound to pay this debt?
Q:
Describe the different approaches taken to transnational insolvencies. What is the approach taken currently?
Q:
If an instrument is negotiable, the general rules of contract law control.
Q:
Under which of the following can a bankruptcy petition be initiated only by a voluntary petition?
A. Chapter 7
B. Chapter 11
C. Chapter 13
D. Chapter 15
Q:
A Chapter 13 debtor must begin making the instalment payments proposed in her plan:
A. within 30 days after the plan is filed.
B. one week after the plan is approved by the creditors.
C. within 60 days after the plan is approved by the court.
D. within one week of the formal submission to the trustee.
Q:
What Chapter of the bankruptcy code is liquidation for businesses?
A. Chapter 12
B. Chapter 11
C. Chapter 15
D. Chapter 7
Q:
Ajax has accumulated debts which the company is unable to pay. The company has four creditors who hold security provided by Ajax and are valued as follows: Ace ($6,000), Crest ($3,000), Maxton ($8,000) and Interon ($9,000). Which of these creditors will be able to successfully file a petition for involuntary bankruptcy for Ajax?
Q:
Under Chapter 13 of the Bankruptcy Act:
A. the petition may be voluntary or involuntary.
B. no debt extensions are permitted.
C. no plan may be approved if an unsecured creditor objects.
D. no trustee is appointed.
Q:
A Chapter 13 of the Bankruptcy Code provides an advantage to the debtor by which:
A. the debtor is not obligated to reveal all his assets.
B. unsecured creditors are not recognized as valid creditors.
C. the debtor can avoid the stigma of bankruptcy by getting an opportunity to pay the debts in installments under the protection of a federal court.
D. the court does not appoint a trustee, as it relies on the good faith of the debtor for the settlement of all debts.
Q:
Under Chapter 12 of the Bankruptcy Act:
A. only farms with an aggregate debt exceeding $5 million are covered.
B. the debtor must cease to operate the farm.
C. no trustee is appointed.
D. the debtor is usually permitted to remain in possession to operate the farm.
Q:
Fanny and her husband Fred own a farm in Iowa. Unfortunately, after earning a $50,000 income on the farming operation and $10,000 in non-related endeavors in 2002, Fanny and Fred accumulated $100,000 in farm-related debt. Their only other debt is a $10,000 on a truck purchased in 2001. Fanny and Fred want to file for a Chapter 12 plan. Which of the following statements is most accurate?
A. Fanny and Fred do not qualify for protection under a Chapter 12 plan.
B. Fanny and Fred will not be able to remain in possession of their farm under the plan.
C. A trustee will be allowed to sell unnecessary assets such as equipment.
D. A trustee will not be appointed under the plan.
Q:
_____ refers to a situation wherein the court forces dissenting creditors to accept a reorganization plan when the court finds that it is fair and equitable.
A. Cram down
B. Make one whole
C. Divestiture
D. Restitution
Q:
A plan is considered to be fair and equitable to a class of impaired claimants with unsecured claims if the reorganization plan:
A. provides for the sale of any property subject to liens securing such claims free and clear of such liens with the liens to attach to the proceeds of the sale.
B. provides for the realization by the holders of the "indubitable equivalent" of such claims.
C. provides that each holder of a claim will receive or retain on account of the claim property of a value equal to the allowed amount of such claim.
D. provides the holder of any interest that is junior to the interests of such class will not receive any property on account of such junior claim.
Q:
In a reorganization petition under Chapter 11 of the Bankruptcy Code, if any particular class of creditors rejects the reorganization plan, the Court will:
A. disallow the claims of the rejecting creditors.
B. force the trustee to renegotiate with the rejecting creditors so that a compromise maybe reached at.
C. order the debtor to file bankruptcy under Chapter 13.
D. force the rejecting creditors to accept the reorganization plan, if the plan is fair and equitable towards the rejecting creditors.
Q:
Debtors have to file a statement of their calculations under the _____ as part of their schedule of current income and expenditures.
A. limiting test
B. Fizeau test
C. means test
D. Sagnac test
Q:
Which of the following is true regarding reorganizations under Chapter 11?
A. Only corporations are eligible for Chapter 11.
B. Chapter 11 proceedings are voluntary only.
C. No trustee can be appointed.
D. The court must confirm any reorganization plan approved by the creditors.
Q:
To which of the following is Chapter 11 not available?
A. Manufacturing corporations
B. A sole proprietorship that sells used cars
C. A bank
D. A natural person
Q:
If there are insufficient funds to satisfy all the creditors within a class:
A. the debtors have the last say on the amount that each member shall receive.
B. the class members decide amongst themselves the amount that each of the members should receive.
C. the court makes an arbitrary decision regarding the share of each member.
D. each class member receives a pro rata share of his claim.
Q:
Under Chapter 7, a debtor is denied discharge of all debts when:
A. the debtor has transferred property in order to defraud creditors.
B. the debtor has unpaid tax liabilities.
C. the debtor has made a preferential transfer to a creditor.
D. the debtor has made a fraudulent transfer.
Q:
In order to safeguard the debtor from reaffirmation agreements the Court:
A. allows the debtor to rescind the reaffirmation agreement within a period of 60 days.
B. is empowered to declare all reaffirmation agreements as void.
C. may order the creditor to demand only 50 percent of the original debt amount.
D. may allow a reaffirmation agreement only if the debtor is represented by an attorney.
Q:
_____ refers to the agreement between the debtors and the creditors wherein creditors put pressure on debtors to pay, debts that have been discharged in bankruptcy.
A. Reaffirmation agreement
B. Miranda warning
C. Blank endorsement
D. Buy-sell agreement
Q:
The means test is designed to determine the:
A. debtor's ability to repay general unsecured claims.
B. creditor's ability to recover unpaid claims from the debtor.
C. court's ability to guarantee exemptions for the debtor.
D. government's ability to bar corporations from availing the provision of discharge of debts.
Q:
Unsecured creditors, to the extent that the Bankruptcy estate is solvent, share in proportion to what?
A. Amount paid in legal fees
B. Claims against the debtor
C. Based on size of the creditors
D. Based on the geographic locations of creditors
Q:
An individual will not be granted a discharge, if such discharge has been granted to the individual within the previous:
A. five years.
B. six years.
C. seven years.
D. eight years.
Q:
In a Chapter 7 liquidation proceeding, the claims of creditors are paid in which of the following order?
A. Priority claims take precedence over claims made by secured and unsecured creditors.
B. The claims of secured creditors are satisfied first, followed by priority claims, and lastly claims made by unsecured creditors.
C. Older claims are given priority over more recent claims.
D. Claims of secured creditor are satisfied first, followed by unsecured creditors, and lastly priority claims.
Q:
Under the Bankruptcy Code a judge is allowed to reduce the debt of an unsecured consumer creditor by what percentage?
A. 20%
B. 30%
C. 50%
D. 75%
Q:
Which of the following fits within one of the exceptions to the Bankruptcy Act's preference provision?
A. A perfected Article 9 security interest.
B. A transfer to an insider of the debtor.
C. A transfer made in the ordinary course of the debtor's business.
D. A consumer's transfer of less than $2.000 to a creditor who has sold her consumer goods.
Q:
Selena pays back a $2,000 loan from her parents within one year before she files the bankruptcy petition. This is an example of:
A. anticipatory breach.
B. a secured transaction.
C. preferential payment.
D. a failure of consideration.
Q:
A creditor might try to obtain an advantage over other creditors by obtaining a(n) _____ on the debtor's property to secure an existing debt.
A. surety
B. preferential lien
C. presentment
D. equity of redemption
Q:
Which of the following transfers would be considered fraudulent under the 2005 revisions of the Bankruptcy Code?
A. Transfers that are intended by the debtor and creditor to be a contemporaneous exchange for new value.
B. Transfers that led to the creation of a security interest in new property where new value was given by the secured party to enable the debtor to obtain the property.
C. Transfers made in payment of a debt incurred in the ordinary course of the business of the debtor and the transferee.
D. Transfers to or for the benefit of an insider under an employment contract and not in the ordinary course of business.
Q:
An absolute $136,875 homestead cap applies if:
A. the debtor's aggregate interest exceeds $1,450 in value in jewellery held primarily for the personal, family, or household use of the debtor.
B. retirement funds that are in a fund or account are exempt from taxation under the Internal Revenue Code.
C. the debtor's interest exceeds $136,875 in value in real or personal property.
D. the bankruptcy court determines that the debtor has been convicted of a felony.
Q:
The debtor is also permitted to void _____ liens against exempt properties that impair her exemptions.
A. medical
B. tax
C. attorney
D. judicial
Q:
_____ refers to securing exempt personal property from secured creditors by paying them the full value of the collateral at the time the property is redeemed.
A. Automatic stay
B. Discharge
C. Exemption
D. Redemption
Q:
Abe and Hanna are husband and wife. They have filed for Chapter 7 Bankruptcy. However, they cannot agree on which set of property exemptions they want to use. Abe wants to use the federal set of exemptions, but Hanna wants to use the set of Michigan, where they have lived for 10 years. Under these circumstances:
A. the federal exemptions will apply to this bankruptcy proceeding.
B. the Michigan exemptions will apply to this bankruptcy proceeding.
C. the federal exemptions will apply to Abe's property and the Michigan exemptions will apply to Hanna's property.
D. the bankruptcy court will decide which set of exemptions to apply here.
Q:
If a petition for bankruptcy is filed by a health care business:
A. the creditors bear the financial responsibility for the disposal of patient records where there are insufficient funds to continue to store them.
B. the trustee is instructed to transfer patients in a health care business that is in the process of being closed to an appropriate health care business.
C. the necessary costs of closing a health care business is borne by the adjudicating court.
D. the automatic stay provisions apply to actions by the Secretary of Health and Human Services to exclude the debtor from participating in federal health care programs.