Q&A Hero

Q: Current City (CC) is a retail seller of television sets. CC sells Dhani a $5,000 large-screen, high-definition, plasma set on a retail installment security agreement in which he pays $100 down and agrees to pay the balance in equal installments. CC retains a security interest in the set, and perfects that interest by filing a financing statement centrally. Two months later, Dhani is in default on the payments to CC and is involuntarily petitioned into bankruptcy by other creditors. Discuss CC's right to repossess the TV set and whether CC has priority over the trustee in bankruptcy to any proceeds from the disposal of the set.

Q: 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?

Q: Wilbur files a petition in bankruptcy for relief through an individual's repayment plan. Wilbur is granted a discharge. Debts that will not be discharged include claims for A.contributions to employee benefit plans. B.money to be paid for services not rendered. C.fraudulently incurred debt. D.long overdue credit-card debt.

Q: 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.

Q: 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.

Q: To adjust debts and institute a repayment plan that is less expensive and less complicated than other options, Brunch & Lunch Caf, 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.

Q: 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 individual'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.

Q: Tippi believes that she needs to obtain a discharge in bankruptcy through an individual's repayment plan. This proceeding can be initiated by a filing of a petition by A.a creditor. B.a debtor. C.a corporation. D.a partnership.

Q: To adjust debt and institute a repayment plan, Charlie-who is not a corporation, a partnership, or a family farmer or fisherman-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.

Q: Swim & Trim Fitness Corporation wants to formulate a plan under which it pays a portion of its debts and is discharged of the remainder while continuing in business. To accomplish this goal, Swim & Trim should file a petition in bankruptcy for relief through A.a liquidation. B.a reorganization. C.a repayment plan. D.a family-farmer bankruptcy plan.

Q: Ronaldo agrees to pay Simplex Cash Store a debt that is otherwise dischargeable in bankruptcy. This is A.a reaffirmation. B.a liquidation. C.a reorganization. D.a petition.

Q: Reconstruction Building Services receives a discharge in bankruptcy, even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy. Reconstruction's discharge will A.absolve the liability of any co-debtors. B.permit the debtor to enter into reaffirmation agreements. C.allow the debtor to file a petition for a reorganization. D.prohibit actions and void judgments regarding overdue debts.

Q: Teona files a voluntary petition in bankruptcy for relief through a liquidation. Debts that will not be discharged include claims for A.domestic-support obligations. B.money to be paid for goods not delivered. C.contributions to employee benefit plans. D.long overdue credit-card debt.

Q: Mac files a petition for a discharge in bankruptcy. Mac's failure to appear 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.

Q: 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.

Q: 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.

Q: Kenyon files a petition for bankruptcy. Kenyon must include with the petition A.a plan to turn over his future income to the trustee. B.a certificate proving attendance at a credit-counseling briefing. C.a provision of adequate means for the petition's execution. D.a statement of preference for one creditor over another.

Q: Verna files a petition in bankruptcy in a liquidation proceeding. If the court administers the means test and concludes that Verna is abusing the bankruptcy process by filing for a liquidation, the court will most likely A.force Verna to file for relief through an individual repayment plan. B.discharge Verna's debts. C.distribute Verna's property to Verna's creditors. D.issue an automatic stay against any actions by Verna's creditors.

Q: 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.

Q: 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.

Q: Fact Pattern 19-2 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 19-2. 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: Fact Pattern 19-2 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 19-2. Mary will receive A.0. B.$30,000. C.$50,000. D.$60,000.

Q: Fact Pattern 19-2 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 19-2. Nina may recover A.0. B.$30,000. C.$50,000. D.$60,000.

Q: Laurel defaults on a loan owed to Maverick Bank. As a creditor, Maverick may attempt to place liens on all of Laurel's property except A.motor vehicles used to commute to work. B.stock in various corporations. C.items that Laurel selects. D.vacant commercial property.

Q: 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.

Q: Doral, Eduard, and Francesca are co-sureties of Glenda's debt to Hi-Credit Company. Doral pays Glenda's entire debt. Doral's right to seek proportionate payments from Eduard and Francesca is the right of A.contribution. B.redemption. C.reimbursement. D.subrogation.

Q: Speedy Delivery Company buys a white van from Tom's Terrific Vehicles, on credit under a guaranty signed by Ulysses, Speedy's president, making him personally liable if Speedy does not pay. Ulysses is A.a surety. B.a lienor. C.a guarantor. D.a creditor.

Q: Fact Pattern 19-1 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 19-1. 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.

Q: Fact Pattern 19-1 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 19-1. 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.

Q: 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.

Q: Liu and Midge-Nero's creditors-contract with Nero for the discharge of Nero's liquidated debts on payment of a lesser sum. This is A.a composition agreement. B.a subrogation. C.a suretyship agreement. D.in violation of most states' laws.

Q: 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.

Q: Ping's debt to Oak Furniture Warehouse is past due. Oak obtains a judgment against Ping, but Ping refuses to pay it. Oak asks the court for an order that directs the sheriff to seize and sell any of Ping'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: Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets, which Ewing still possesses. Ewing's lien on the sets will terminate A.if Ewing continues to maintain possession. B.if Ewing does not file a written notice of lien within thirty days. C.if Ewing voluntarily surrenders possession. D.within thirty days.

Q: 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.

Q: Diego performs a contract with Elwood to add a swimming pool to Elwood's property, but Elwood does not pay. Diego can file a lien on Elwood'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: Residence Painting Company has a claim against Stuart'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 writ of attachment. D.a garnishment.

Q: 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.

Q: The content of a family-fisherman bankruptcy plan is basically the same as that of a repayment plan.

Q: In a repayment plan case, the plan must provide for payment of all obligations in full.

Q: Certain reorganization cases may be converted to repayment plan cases with the consent of the debtor.

Q: 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.

Q: Certain liquidation cases may be converted to repayment plan cases with the consent of the debtor.

Q: On the entry of an order for relief in a reorganization case, the creditors generally take over the operation of the debtor's business.

Q: The same principles that govern the filing of a liquidation petition apply to reorganization proceedings.

Q: One of the primary effects of a discharge is to relieve the liability of a co-debtor.

Q: A bankruptcy court may deny a discharge based on the debtor's conduct.

Q: Certain debtors may not qualify to have all debts discharged in bankruptcy.

Q: Certain debts are not dischargeable in bankruptcy.

Q: An individual debtor is allowed to exempt certain property from the bankruptcy.

Q: The basic duty of a trustee is to collect and reduce to cash the property in the bankruptcy estate that is not exempt.

Q: A bankruptcy estate consists of all the debtor's interests in property currently held, wherever located.

Q: An involuntary bankruptcy occurs when the debtor's credit does not cover all of his or her debts.

Q: If a debtor's income is below the median income, there is a presumption of bankruptcy abuse.

Q: A debtor wishing to file for bankruptcy must complete the means test to determine whether he or she qualifies.

Q: A debtor does not need to be insolvent to file for bankruptcy relief.

Q: Any "person" may be a debtor in a liquidation proceeding.

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

Q: Personal property that is most often exempt from satisfaction of judgment debts does not include livestock.

Q: Each state permits a debtor to retain the family home, in its entirety or in part, free from the claims of unsecured creditors.

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

Q: 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.

Q: 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.

Q: Payment of the principal obligation will not discharge the surety from the obligation.

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

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

Q: Creditors may contract with a debtor for discharge of the debtor's liquidated debts.

Q: Federal law governs garnishment actions.

Q: A creditor's composition agreement is usually held to be unenforceable.

Q: Under federal law, an employer can dismiss an employee because his or her wages are being garnished.

Q: 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.

Q: The holder of an artisan's lien can foreclose and sell the property subject to the lien to satisfy the debt.

Q: Region Bank wants to perfect its security interest in timber owned by Superior Lumber, Inc. Most likely, a financing statement should be filed with A.the local chamber of commerce. B.the county clerk. C.the federal loan officer. D.the secretary of state's office.

Q: County Bank wants to perfect its security interest in collateral owned by Direct Sales Company. Most likely, a financing statement should be filed with A.the local chamber of commerce. B.the county clerk. C.the federal loan officer. D.the secretary of state's office.

Q: Mona lives in New Jersey, but she works in New York. Mona borrows $1,000 from National Bank, using her motorcycle as collateral. To perfect its security interest, the bank must file its financing statement in at least A.every state. B.New Jersey. C.New Jersey and New York. D.New York.

Q: The payment of Yves's debt to Zac is guaranteed by Yves's personal property. Their agreement describes Yves's subject property by serial number. To establish Zac's interest, this is A.irrelevant. B.not sufficient. C.sufficient if it accurately describes the parties' agreement. D.sufficient unless it is too tedious to review.

Q: Fact Pattern 18-1 Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. Refer to Fact Pattern 18-1. Ira, a police officer, buys an Excel from Fine to drive in his off-duty hours. Ira's Excel is A.a consumer good. B.an accession. C.equipment. D.inventory.

Q: Fact Pattern 18-1 Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. Refer to Fact Pattern 18-1. Holly, a professional driver, buys an Excel from Fine to drive in a Grand Prix race. Holly's Excel is A.a consumer good. B.an accession. C.equipment. D.inventory.

Q: Fact Pattern 18-1 Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. Refer to Fact Pattern 18-1. A car in Fine's possession is probably A.a consumer good. B.an accession. C.equipment. D.inventory.

Q: The payment of Nero's debt to Olly is guaranteed by Nero's personal property. Nero is located in Pennsylvania. Olly communicates to the appropriate state official a security agreement that uses only Quality Engineering, the trade name of Nero's business. To perfect Olly's interest, this is A.irrelevant. B.not sufficient. C.sufficient if Quality Engineering is a sole proprietorship. D.sufficient if the trade name is spelled correctly or misspelled slightly.