Q&A Hero

Q: Which of the following is a moratorium for almost all creditor litigation against a debtor in a Chapter 7 bankruptcy? A. A stop order B. An automatic stay C. A semi-automatic dismissal D. A semi-discharge E. A means discharge

Q: Which of the following is true regarding actions that may be taken while an automatic stay is in effect in a Chapter 7 proceeding? A. Creditors cannot attempt to repossess property during bankruptcy proceedings. B. A creditor who received a judgment against a debtor prior to the bankruptcy filing may act to enforce the judgment. C. Legal actions to collect child support payments are not subject to the stay. D. Once a filing is allowed and a stay is in effect, the rules are the same regardless of previous bankruptcies. E. All of these are true.

Q: Which of the following is true regarding the effect of an automatic stay on claims of secured creditors in a Chapter 7 proceeding? A. The stay affects claims of secured creditors in the same way in which it affects claims of unsecured creditors. B. Secured creditors with claims of over $5,000 are not affected by the stay. C. Secured creditors with claims of over $15,000 are not affected by the stay. D. Secured creditors with claims of over $20,000 are not affected by the stay. E. The court may exclude secured creditors from the stay if they petition the court to show that they do not have adequate protection under the stay.

Q: By filing a(n) ______ petition under Chapter 7, creditors can attempt to force a debtor who is not paying debts as they become due into bankruptcy. A. voluntary B. involuntary C. complaint D. accusatory E. dispute

Q: Which of the following cannot be forced into involuntary bankruptcy under Chapter 7? A. Farmers B. Ranchers C. Nonprofit organizations D. Farmers, ranchers, and nonprofit organizations E. Farmers and ranchers, but nonprofit organizations may be forced into involuntary bankruptcy

Q: Under which test may a court presume that an individual is abusing the bankruptcy provisions of Chapter 7 when an individual's debt is primarily consumer debt and the individual's income is above the median income in his or her state? A. The means test B. The assets test C. The median test D. The liquidation test E. The bankruptcy test

Q: Which of the following occurs when a debtor turns over all assets to a trustee? A. Liquidation B. Reorganization C. Reformation D. Acknowledgment E. Avoidance

Q: A(n) _________________ takes over administration of the debtor's estate. A. administrator B. aligner C. organizer D. reformer E. trustee

Q: Which of the following are ineligible for Chapter 7 relief in bankruptcy? A. Banks. B. Railroads. C. Health maintenance organizations. D. Banks, railroads, and health maintenance organizations. E. Banks and railroads, but not health maintenance organizations.

Q: Once a voluntary liquidation proceeding under Chapter 7 is filed, the debtor's prepetition assets form the ______. A. corpus B. remainder C. residual estate D. bankruptcy estate E. relinquished asset pool

Q: Which title of the United States Code contains the Bankruptcy Code? A. Title 9 B. Title 11 C. Title 7 D. Title 15 E. Title 34

Q: Which of the following is false regarding provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005? A. Under the Act, an individual may not generally be considered a debtor unless within 190 days prior to filing, the debtor receives credit counseling from a nonprofit budget and credit counseling agency. B. Under the Act, if an individual was a debtor in a bankruptcy case that was dismissed within 190 days of the current case, the individual is generally not eligible to be a debtor under Chapters 7, 11, or 13. C. Under the Act, if a previous bankruptcy was completed rather than dismissed, the individual is generally permitted to file for bankruptcy again. E. Under the Act if a party has at least $10,000 in assets, the party may not file for any type of bankruptcy protection. If an individual's debt is primarily consumer debt and if the individual's income is above the median income in his or her state, the court may presume that the individual is abusing the bankruptcy provisions; but there is no provision that a party may not file for any type of bankruptcy if the party has at least $10,000 in assets.

Q: Which of the following is called straight bankruptcy? A. Liquidation B. Reorganization C. Reformation D. Acknowledgment E. Avoidance

Q: Congress makes comprehensive changes to bankruptcy law in the ______________. A. Bankruptcy Amendments of 2005 B. Bankruptcy Fraud Protection Act of 2007 C. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 D. Bankruptcy Fraud and Consumer Shield Act of 2006 E. Insolvency Protection Amendments of 2006

Q: Which chapter of the Bankruptcy Code is used for a sale of a debtor's assets by a trustee and the distribution of money to creditors? A. Chapter 7 B. Chapter 9 C. Chapter 11 D. Chapter 13 E. Chapter 15

Q: Which chapter of the Bankruptcy Code is used as a reorganization of the debtor's financial affairs under supervision of the bankruptcy court? A. Chapter 7 B. Chapter 9 C. Chapter 11 D. Chapter 14 E. Chapter 15

Q: Which of the following chapters of the Bankruptcy Code recognizes insolvency proceedings pending in a foreign country and relief for foreign debtors? A. Chapter 7 B. Chapter 9 C. Chapter 11 D. Chapter 14 E. Chapter 15

Q: Which of the following is true regarding the manner in which a secured party may sell collateral? A. The sale must be in a private sale. B. The sale must be in a public sale. C. The sale may be in either a private sale or a public sale. D. The sale may be in a private sale, public sale, or an acknowledged sale. E. The sale must be in an acknowledged sale.

Q: Bankruptcy remedies are available to ______________________. A. individuals B. individuals and corporations C. individuals and partnerships D. corporations and partnerships E. individuals, corporations, and partnerships

Q: Which of the following is a term used in bankruptcy for debtors who cannot pay their debts in a timely fashion? A. Statutory debtors B. Insolvent debtors C. Owners D. Transactors E. Acknowledged transactors

Q: Which of the following is true regarding the UCC's definition of default? A. The UCC defines default as failure to make any payment when due. B. The UCC defines default as failure to make a payment within 30 days after a payment is due. C. The UCC defines default as failure to make a payment within 60 days after a payment is due. D. The UCC defines default as failure to make a payment within 90 days after a payment is due. E. None of these because the UCC does not define default.

Q: What type of court order does a secured party need to take possession of the collateral if the debtor defaults? A. An order to take possession B. An order to breach the peace C. An order for retention of the collateral D. An order for protective relief E. The secured party does not need an order to take possession.

Q: _________________ paper is a writing that demonstrates a right to payment of money. A. Chattel B. Goods C. Payment D. Instrument E. Authorization

Q: Which of the following may a buyer purchase in the ordinary course of business and obtain the goods free of any security interest so long as the buyer is unaware of any security interest in the good? A. Chattel paper. B. An instrument. C. An authorization. D. Chattel paper, instruments, and authorizations. E. Chattel paper and instruments, but not authorizations.

Q: Which party routinely buys goods in good faith from a person who routinely sells these goods? A. A buyer in the typical course of business. B. An approved buyer. C. An approved buyer in the ordinary course of business. D. A buyer in the ordinary course of business. E. An exchanger in the typical course of business.

Q: What happens under the UCC, if a buyer of a consumer good subject to purchase-money security interest later sells the good? A. The security interest immediately terminates. B. The security interest passes to the new buyer. C. Regardless of whether the buyer is aware of the security interest, the security interest terminates if the sale to the new buyer is made before the original secured party files a financial statement. D. As long as the buyer is not aware of the security interest, purchases the good for his or her personal use, and purchases the good before the secured party files a financial statement, the new buyer obtains the good free of the security interest. E. As long as the buyer is not aware of the security interest, purchases the good for resale, and purchases the good before the secured party files a financial statement, the buyer obtains the good free of the security interest.

Q: What type of paper indicates both a monetary obligation and a security interest in specific goods? A. Chattel paper. B. Combined paper. C. Transactional paper. D. Monetary and secured paper. E. Specific interest paper.

Q: Under the UCC, a secured party's interest in proceeds lasts for ______ after the debtor receives the proceeds. A. 30 days B. 60 days C. 1 year D. 5 days E. 10 days

Q: Which of the following is an amendment to a financing statement that states that the debtor has no obligation to the secured party? A. An ending statement. B. A termination statement. C. A bind-up statement. D. A release statement. E. A reversion statement.

Q: In a dispute between two secured unperfected parties, which of the following is true? A. The party who attached its interest first will prevail. B. The party who attached its interest second will prevail. C. The parties will divide the proceeds evenly between them. D. The party who loaned the most money on the collateral has priority. E. The party who loaned the least amount on the collateral has priority.

Q: What kind of property is property acquired by the debtor after a security agreement covering the property is made? A. Post-dated property. B. After-acquired property. C. Proceeds. D. Post-acquired property. E. Subsequently acquired property.

Q: Which of the following can be considered after-acquired property? A. Inventory. B. Livestock. C. Equipment. D. Inventory, livestock, and equipment. E. Inventory and equipment, but not livestock.

Q: When a debtor sells collateral, he or she receives ______, something that is exchanged for collateral. A. after-acquired property B. subsequent-acquired property C. proceeds D. collateral E. post-financed funds

Q: Which of the following is true regarding a secured party's interest in proceeds? A. A secured party automatically has an interest in proceeds for a limited amount of time. B. A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party. C. A secured party has an interest in proceeds only if a financing statement is filed on the proceeds. D. A secured party has an interest in proceeds if the secured party takes the proceeds into the possession of the secured party or if the secured party files a financing statement on the proceeds. E. The secured party may not acquire a security interest in proceeds unless a new agreement regarding the proceeds is reached with the debtor.

Q: Which is not a method of perfection? A. Perfection by pledge B. Perfection by filing C. Perfection by possession D. Automatic possession E. Perfection of movable collateral

Q: What is the national standard to perfect an automobile or boat? A. Perfection by pledge B. Perfection by filing C. Perfection by possession D. Automatic possession E. There is no national standard to perfect an automobile or boat.

Q: Which of the following is true under the UCC regarding a security interest in collateral that has been perfected in one state when the collateral is moved to another state? A. A security interest in collateral that has been perfected in one state will generally expire immediately when the collateral is moved to another state. B. A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of four months from the date that the property is brought into the other state. C. A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of six months from the date that the property is brought into the other state. D. A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of two months from the date that the property is brought into the other state. E. A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of 30 days from the date that the property is brought into the other state.

Q: Under the UCC __________________ is a good used or bought for use primarily for personal, family, or household purposes. A. a retail good B. a consumer good C. a pledged good D. a financed good E. an approved good

Q: Transfer of collateral to a secured party for the purpose of perfection is called a(n) ______. A. allegiant B. pledge C. transfer D. allonge E. release

Q: What type of collateral must be perfected through possession? A. Certificates of deposit. B. Stocks. C. Bonds. D. Certificates of deposit, stocks, and bonds. E. There are no types of collateral that must be perfected through possession.

Q: Failure to make payments on a loan is __________________________. A. value B. default C. collateral D. perfection E. PMSI

Q: Which of the following is defined as the series of legal steps a secured party takes to protect its rights and collateral from other creditors who wish to have their debts returned through the same collateral? A. Perfection. B. Filing. C. Noticing. D. Financing noticing. E. Arrangement.

Q: According to the UCC, a financing statement list should include _________. A. the names and addresses of all parties involved only B. the names and addresses of all the parties involved and a description of the collateral only C. the names and addresses of all the parties involved, a description of the collateral, and the signature of the debtor D. the name of the financing bank and the name of the debtor, and a description of the collateral E. the name of the financing bank, the signature of the debtor, a description of the collateral, and details of the loan repayment schedule

Q: Once a financing statement has been filed with a correct agency, for how long is the statement valid under the UCC without renewal? A. 1 year. B. 2 years. C. 3 years. D. 5 years. E. 10 years.

Q: Which of the following is an example of an intangible(s)? A. Accounts. B. Goodwill. C. Literary rights. D. Accounts, goodwill, and literary rights. E. Accounts and goodwill, but not literary rights.

Q: When, the creditor becomes the secured party who has a security interest in the collateral __________ occurs. A. attachment B. transformation C. reaffirmation D. security E. perfection

Q: When a debtor uses borrowed money from the secured party to buy the collateral, a(n) _____________________ interest is formed. A. secured possessory B. loaned money possessory C. purchase-money security D. purchase-cash consumer E. perfected security

Q: An agreement in which the debtor gives the secured interest to the secured party is a(n) ________________________ agreement. A. collateral B. secured C. debtor D. protected E. security

Q: Which of the following are examples of collateral? A. Goods and indispensable paper. B. Goods and intangibles. C. Goods and proceeds. D. Goods, indispensable paper, and proceeds. E. Goods indispensable paper, intangibles, and proceeds.

Q: Which of the following are examples of goods? A. Consumer goods. B. Farm products. C. Documents of title. D. Consumer goods, farm products, and documents of title. E. Consumer goods and farm products, but not documents of title.

Q: Which of the following is an example of indispensable paper? A. Fixtures. B. Documents of title. C. Accounts. D. Fixtures, documents of title, and accounts. E. Fixtures and documents of title, but not accounts.

Q: An interest in personal property or fixtures which secures payment or performance of an obligation is a called a(n) ____________________. A. approved interest B. secured interest C. secured transaction D. debt transaction E. security agreement

Q: The person or party that holds the interest in the secured property is the ___________. A. debtor B. transaction party C. approved party D. secured party E. attached party

Q: A ______ is a person or party that has an obligation to the secured party. A. creditor B. debtor C. secured creditor D. secured debtor E. transaction debtor

Q: Bruce, who works for Laura's used car dealership, forges Laura's name to two checks, cashes the checks, and deposits the funds into his own bank account. Later, Bruce's conscience starts to bother him and he confesses to Laura. Bruce promises to repay her if she will only give him some time. Laura wants to keep Bruce as an employee because he is great with sales, so she agrees to give him some time in which to repay her. Ten months later, Bruce gets angry with Laura because he thinks she cheated him on a commission and leaves town without ever reimbursing her for the checks. Laura tells the bank that she wants her account credited. The bank asks your advice. What would you tell the bank and why?

Q: A transaction in which the payment of a debt is guaranteed by personal property owned by the debtor is a(n) __________________________. A. transfer transaction B. approved transaction C. secured transaction D. effected transaction E. guaranteed transaction

Q: Which of the following articles of the UCC govern secured transactions in personal property? A. Article 1. B. Article 4. C. Article 5. D. Article 7. E. Article 9.

Q: Identify and describe the two types of digital signatures.

Q: What are the conditions for a drawer or endorser to become liable?

Q: Set forth the five items that a party warrants when the party transfers an instrument for consideration.

Q: Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy. Martin decided to quit but not before he got some extra money from ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five credit card companies that Martin owed money. The credit card companies took the checks without reason to be suspicious as to the source of payment. The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000. Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist. Each of these checks was in the amount of $5,000. Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash. Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc. located in a neighboring state and that Adam is supposed to go there for an in person interview in a few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus. Martin immediately endorses the check pretending to be Adam and pockets the cash. Finally, Martin leaves town heading for the Caribbean. Is XYZ, Inc. entitled to a refund from its bank for the check the bank paid to Martin posing as Adam? A. Yes, because Martin forged Adam's name. B. Yes, because Martin posed as an imposter in regard to Adam. C. Yes, because the XYZ, Inc. has a cause of action against Martin and can likely get a default judgment. D. No, because of the imposter rule. E. No, because of the fictitious-payee rule.

Q: Discuss whether or not you believe that our law should recognize holder in due course status with its resulting rights.

Q: Set forth the requirements a party must meet in order to be considered a holder in due course.

Q: Set forth the conditions under which a holder may take an instrument for value.

Q: Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance, being somewhat dishonest, tells Henry, a customer of the bank who is wealthy and rarely checks the status of outstanding loans and balances, that she is collecting money for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to the animal shelter. In fact, she had him sign a promissory note made out to her for $5,000, which she later endorsed to Richard. Henry proceeds back to one of his businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha make out promissory notes payable to Henry. At the end of the day, Henry is looking through the notes and decides that Taylor's was mistakenly made out for $3,000. Henry mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not like Martha. He decided that $4,000 was not enough for the car. Accordingly, he changed the note to $4,500. Which of the following is true regarding Martha's liability to Henry? A. Because of the fraudulent alteration, Martha is not liable to Henry for any amounts under the promissory note although she may be liable under some other theory. B. Martha's obligation will be enforced only in the amount of $4,000. C. Martha's obligation will be enforced in the amount of $4,500 unless she has a writing signed by Henry to the effect that the deal was for 4,000. No other evidence would be allowed. D. Unless Martha has a written document from Henry to the effect that the agreement was for $4,000 only, Martha and Henry will be legally required to split the remainder with Martha being held responsible for $4,250. E. Unless Martha either has a written document from Henry showing that the agreement was for $4,000 or unless she can get Henry to admit that the agreement was for $4,000, then Martha will be required to pay $4,500 because the obligation was upon Martha to obtain confirmation of the terms of the original agreement.

Q: Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy. Martin decided to quit but not before he got some extra money from ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five credit card companies that Martin owed money. The credit card companies took the checks without reason to be suspicious as to the source of payment. The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000. Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist. Each of these checks was in the amount of $5,000. Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash. Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc. located in a neighboring state and that Adam is supposed to go there for an in person interview in a few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus. Martin immediately endorses the check pretending to be Adam and pockets the cash. Finally, Martin leaves town heading for the Caribbean. Is ABC, Inc. entitled to a refund from its bank for the five checks used to pay Martin's credit card companies? A. Yes, ABC, Inc. is entitled to a refund because the credit card companies cannot be considered payees. B. Yes, ABC, Inc. is entitled to a refund because the credit card companies cannot be considered holders in due course. C. Yes, ABC, Inc. is entitled to a refund because the credit card companies can reverse the credits. D. No, ABC, Inc. is not entitled to a refund because none of the checks were in an amount over $10,000. E. No, ABC, Inc. is not entitled to a refund because the credit card companies are holders in due course entitled to the funds.

Q: Angry employee. Martin is in charge of payroll and other expenses for ABC, Inc. He becomes very angry with his boss Adam because Adam started dating Martin's girlfriend Stacy. Martin decided to quit but not before he got some extra money from ABC, Inc. Martin wrote five checks from the account of ABC, Inc. to pay off the five credit card companies that Martin owed money. The credit card companies took the checks without reason to be suspicious as to the source of payment. The checks to the credit card companies in total amounted to $30,000, and each check was in an amount under $10,000. Martin also made out ten checks on the account of ABC to twenty alleged employees who did not really exist. Each of these checks was in the amount of $5,000. Martin took the checks, endorsed and cashed the checks in the names of the various fake employees, and kept the cash. Finally, Martin discovers through office gossip that Adam has been looking for another job with XYZ, Inc. located in a neighboring state and that Adam is supposed to go there for an in person interview in a few weeks. Martin sets up an interview with XYZ, Inc. pretends to be Adam, and induces XYZ, Inc. to give him, posing as Adam, a check for $5,000 as a signing bonus. Martin immediately endorses the check pretending to be Adam and pockets the cash. Finally, Martin leaves town heading for the Caribbean. Is ABC, Inc. entitled to a refund from its bank for the checks the bank paid written to fake employees? A. Yes, because Martin forged the names of the employees. B. Yes, because Martin posed as an imposter in regard to the employees. C. Yes, because the bank has a cause of action against Martin and can likely get a default judgment. D. No, because of the imposter rule. E. No, because of the fictitious-payee rule.

Q: Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses the note and presents it to Millie for payment. When Henry presents the note to Millie, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Millie, however, refused to provide him the funds until he returned with proper identification. Nevertheless, when he returned with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. Henry proceeded immediately to request that Anne pay the note, but she told him that he would have to get his money from Bob, who cannot be found. Which of the following is the likely result if Henry sues Anne, Bob, and Millie? A. The judge is likely to rule that Henry can recover from Anne, Bob, or Millie. B. The judge is likely to rule that Henry's only option of recovery is against Millie. C. The judge is likely to rule that Henry's only option of recovery is against Anne. D. The judge is likely to rule that Henry can recover against Bob and that Bob may recover against Millie, but Henry cannot recover directly from Anne. E. The judge is likely to rule that Henry's only option for recovery is against Bob.

Q: Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance, being somewhat dishonest, tells Henry, a customer of the bank who is wealthy and rarely checks the status of outstanding loans and balances, that she is collecting money for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to the animal shelter. In fact, she had him sign a promissory note made out to her for $5,000, which she later endorsed to Richard. Henry proceeds back to one of his businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha make out promissory notes payable to Henry. At the end of the day, Henry is looking through the notes and decides that Taylor's was mistakenly made out for $3,000. Henry mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not like Martha. He decided that $4,000 was not enough for the car. Accordingly, he changed the note to $4,500. Which of the following is the most likely result if Henry refuses payment on the promissory note that was endorsed to Richard claiming that he never signed it? A. He will be liable because an official banking document was involved. B. He will not be liable because a party is never liable when the party signed a negotiable instrument without knowing that it is, in fact, a negotiable instrument. C. He will be liable without further inquiry unless he can establish that the note had not been endorsed to a holder in due course. D. He can claim fraud in the factum and whether he is liable or not will depend upon whether a court determines that he should have known what he was signing. E. He can claim fraud in the inducement.

Q: Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance, being somewhat dishonest, tells Henry, a customer of the bank who is wealthy and rarely checks the status of outstanding loans and balances, that she is collecting money for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to the animal shelter. In fact, she had him sign a promissory note made out to her for $5,000, which she later endorsed to Richard. Henry proceeds back to one of his businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha make out promissory notes payable to Henry. At the end of the day, Henry is looking through the notes and decides that Taylor's was mistakenly made out for $3,000. Henry mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not like Martha. He decided that $4,000 was not enough for the car. Accordingly, he changed the note to $4,500. Which of the following is true regarding Taylor's liability to Henry? A. Because of the alteration, Taylor is not liable to Henry for any amounts under the promissory note. B. Taylor's obligation will be enforced only in the amount of $3,000. C. Taylor's obligation will be enforced in the amount of $3,500 unless Taylor has a writing signed by Henry to the effect that the deal was for $3,000. No other evidence would be allowed. D. Unless Taylor has a written document from Henry to the effect that the agreement was for $3,000 only, Taylor and Henry will be legally required to split the remainder with Taylor being held responsible for $3,250. E. Unless Taylor either has a written document from Henry showing that the agreement was for $3,000 or unless he can get Henry to admit that the agreement was for $3,000, then Taylor will be required to pay $3,500 because the obligation was upon Taylor to obtain confirmation of the terms of the original agreement.

Q: Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following would be when presentment, as defined in the UCC, occurred? A. When Doreen presented the check to Hot Dresses, Inc. B. When Betty took the check to ABC Bank C. When ABC Bank requested payment from XYZ Bank D. When XYZ Bank notified Betty that it would not pay based upon insufficient funds E. When Betty requested that Doreen to make the check good

Q: Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses the note and presents it to Millie for payment. When Henry presents the note to Millie, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Millie, however, refused to provide him the funds until he returned with proper identification. Nevertheless, when he returned with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. Henry proceeded immediately to request that Anne pay the note, but she told him that he would have to get his money from Bob, who cannot be found. Which of the following is true regarding when, and if, the note was dishonored? A. The note was never dishonored by Millie because she eventually acknowledged his entitlement to payment and only refused to pay because she lacked funds with which to do so. B. Millie dishonored the instrument when she asked for proper identification. C. Millie dishonored the instrument when she refused to pay it on the basis that she lacked funds with which to do so, but Anne did not dishonor the instrument. D. Anne dishonored the instrument when she told Henry that he would have to seek recovery from Bob, but Millie did not dishonor the instrument. E. Millie dishonored the instrument when she told Henry that she could not pay him because she lacked the funds, and also Anne dishonored the instrument when she told Henry that he would have to seek payment from Bob.

Q: Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses the note and presents it to Millie for payment. When Henry presents the note to Millie, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Millie, however, refused to provide him the funds until he returned with proper identification. Nevertheless, when he returned with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. Henry proceeded immediately to request that Anne pay the note, but she told him that he would have to get his money from Bob, who cannot be found. Which of the following is true regarding Henry's entitlement to payment from Millie? A. Henry is only entitled payment from Millie because Anne dishonored the payment. B. Henry is not entitled to payment from Millie unless Bob, in addition to Anne, dishonors the instrument. C. Henry is never entitled payment from Millie because he must seek recovery only from Anne. D. Henry is entitled to recover on the note from Millie. E. Henry is entitled to recover on the note from Millie only if both Anne and Bob have filed bankruptcy or cannot be found.

Q: Run Around. Millie issues a note to Bob. Bob endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Henry. In a timely fashion, Henry endorses the note and presents it to Millie for payment. When Henry presents the note to Millie, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Millie, however, refused to provide him the funds until he returned with proper identification. Nevertheless, when he returned with proper identification, Millie refused to pay the note, claiming that she lacked the funds with which to do so. Henry proceeded immediately to request that Anne pay the note, but she told him that he would have to get his money from Bob, who cannot be found. Which of the following is true regarding Anne's statement to Henry that he must seek recovery from Bob? A. Anne is correct. B. Anne is correct only if Bob is able to pay and has not filed bankruptcy. C. Anne is correct in that Henry should seek recovery from Bob only if Millie has filed bankruptcy because, otherwise, Henry should be seeking primary payment from Millie. D. Anne is correct unless the notice is for over $10,000, in which case Henry can seek recovery from her without resorting to recovery from Bob or Millie. E. Anne is incorrect. Henry may seek recovery from her without first seeking recovery from Bob or Millie.

Q: Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following would be considered the drawer of the check Doreen presented to Betty at Hot Dresses, Inc.? A. Doreen B. Hot Dresses, Inc. C. Betty, because she owned Hot Dresses, Inc. D. Doreen's bank E. Betty's bank

Q: Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following is the drawee of the check Doreen presented to Hot Dresses, Inc.? A. Doreen B. Hot Dresses, Inc. C. Betty, because she owned Hot Dresses, Inc. D. Doreen's bank E. Betty's bank

Q: Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed down the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following is the holder of the check? A. Doreen B. Hot Dresses, Inc. C. Doreen's bank D. Betty's bank E. There is no holder in this instance

Q: Check Cashing Business. Susan owns and operates a check cashing business. A customer, Bob, claiming to be Sam, comes in and cashes a $2,000 check issued by ABC Trucking to Sam. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the customer had forged Sam's name on the check issued by ABC Trucking. At the time she took the ABC Trucking check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took the ABC Trucking check, she took a check from another customer, Maurice. It was later discovered that the check from Maurice, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice stopped payment on the checks. Susan claims that she was entitled to the status of holder in due course and was entitled to payment on both checks. What is the effect of Susan receiving notice the day after she cashed the check for Bob that the check had been stolen? A. The notice has no effect on her status as holder in due course because it was provided after she cashed the check. B. The notice prevents her from being a holder in due course. C. The notice prevents her from being a holder in due course only if Bob had been convicted of check cashing offenses in the past since she would have discovered his history had she checked. D. The notice prevents her from being a holder in due course only if she subjectively knew that Bob had been charged criminally with check cashing violations in the past. E. The notice prevents her from being a holder in due course because it was presented to a business; only individuals can avoid the effect of notice of theft by cashing a check prior to receiving notice.

Q: Check Cashing Business. Susan owns and operates a check cashing business. A customer, Bob, claiming to be Sam, comes in and cashes a $2,000 check issued by ABC Trucking to Sam. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the customer had forged Sam's name on the check issued by ABC Trucking. At the time she took the ABC Trucking check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took the ABC Trucking check, she took a check from another customer, Maurice. It was later discovered that the check from Maurice, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice stopped payment on the checks. Susan claims that she was entitled to the status of holder in due course and was entitled to payment on both checks. What is the effect of the alteration of the check on Susan's status as a holder in due course? A. The alteration has no effect because a holder is not charged with examining an instrument presented for payment. B. The alteration will likely prohibit her from being a holder in due course. C. The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Bob. D. The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration. E. The alteration will affect her status as a holder in due course because it involved over $500; otherwise, based on the purpose of the law to protect holders, the alteration would have had no effect.

Q: Check Cashing Business. Susan owns and operates a check cashing business. A customer, Bob, claiming to be Sam, comes in and cashes a $2,000 check issued by ABC Trucking to Sam. The day after Susan cashed the check, she received a notice from ABC Trucking that some checks had been stolen. It was later discovered that the customer had forged Sam's name on the check issued by ABC Trucking. At the time she took the ABC Trucking check, Susan was very busy with several customers in line. She simply glanced at the check and cashed it. A reasonable examination would have revealed that the check had been materially altered and changed from the amount of $200 to $2,000. Susan decided that she needed to hire some people to help her because she also had a problem with another check. On the same day that she took the ABC Trucking check, she took a check from another customer, Maurice. It was later discovered that the check from Maurice, which was four months old, was the subject of a dispute between Maurice and the issuer of the check for whom Maurice had done some work. The issuer claimed that the work was improperly done. Both ABC Trucking and the issuer of the check to Maurice stopped payment on the checks. Susan claims that she was entitled to the status of holder in due course and was entitled to payment on both checks. What is the effect on Susan's status as a holder in due course in taking the check from the customer that was four months old? A. There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for 150 days. B. There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for 180 days. C. There is no effect on her status as a holder in due course because an instrument is only considered overdue if it is outstanding for one year. D. She would not be considered a holder in due course because a check is considered overdue 90 days after its date. E. It has no effect because a check is never considered overdue.