BUSINESS L 3100

Chapter 34-SECURED TRANSACTIONS IN PERSONAL PROPERTY

TRUE/FALSE

1)A security interest gives a creditor the same protection than is afforded by a right to sue on the debt.

 

                                           

 

2. A security interest is a property right that enables the creditor to take possession of the property if the debtor does not pay the amount owed.

 

                                           

 

3. The property that is subject to the security interest is called collateral.

 

                                           

 

4. In a security agreement, the creditor and the debtor agree that the creditor has a security interest.

 

                                           

 

5. A security agreement need not describe the collateral involved.

 

                                           

 

6. A security agreement must be backed by a written record even if the creditor has possession of the collateral.

 

                                           

 

7. Creditors cannot legally request collateral on a previously unsecured loan.

 

                                           

 

8. For a security interest to attach, the creditor must file a financing statement.

 

                                           

 

9. A debtor must have rights in the collateral for a security interest to attach.

 

                                           

 

10. An after-acquired property clause in a consumer security agreement can cover only goods acquired by the debtor within thirty (30) days after the creditor gave value to the debtor.

 

                                           

 

11. Consumer goods are classified into different categories based on the debtor's intended use, not the physical characteristics of the goods.

 

                                           

12. Grund, a night club performer, financed the purchase of a drum set to be used in his night club act. The collateral is classified as a consumer good.

 

                                           

 

13. Claim in a changing or shifting stock of the buyer’s goods is known as a floating lien.

 

                                           

 

14. Collateral may change its form and character during the course of a security agreement.

 

                                           

 

15. When a security interest in property is inferior to other interests and claims to the property, it is said to be perfected.

 

                                           

 

16. A security interest needs to be perfected, whether or not there are competing claims for the collateral.

 

                                           

 

17. Attachment provides creditors with rights.

 

                                           

 

18. Perfection can occur merely by possession of the collateral by the creditor.

 

                                           

 

19. Consumer goods are not subject to perfection of a security interest.

 

                                           

 

20. When a consumer gives a creditor a security interest in forthcoming health insurance proceeds, the creditor must file a statement with the insurance company in order to have a perfected security interest.

 

                                           

 

21. Creditors receive an automatic 30-day temporary perfection in negotiable instruments taken as collateral.

 

                                           

 

22. Under Revised UCC Article 9, a financing statement must be signed by the debtor.

 

                                           

 

23. Under Revised UCC Article 9, a debtor may authorize a financing statement by acquiring the collateral that is subject to the security agreement.

 

                                           

24. The steps in terminating a financing transaction upon full payment by the debtor include the preparation of a termination statement by the creditor and the presentation of the statement to the filing officer, who marks the record "terminated."

 

                                           

 

25. If two creditors have a security interest in the same collateral, their priority is determined according to the “last in-first out” provision.

 

                                           

 

26. A buyer who buys goods from a debtor in the ordinary course of business is subject to a creditor’s security interest but only if the interest was perfected and the buyer had notice of it.

 

                                           

 

27. Self-help repossession of collateral upon a buyer's default is contrary to public policy and never is allowed.

 

                                           

 

28. Generally, a secured creditor who has repossessed collateral may retain the collateral and cancel the debt.

 

                                           

 

29. A debtor may redeem collateral at any time prior to the time that the secured party has disposed of the collateral or entered into a binding contract for resale by tendering the entire obligation that is owed plus any legal costs and expenses incurred by the secured party.

 

                                           

 

30. Upon the debtor’s default, the creditor may sell the collateral at a public or private sale, or lease it to a third party.

 

                                           

 

MULTIPLE CHOICE

 

1. An interest in personal property or fixtures that secures payment or performance of an obligation is called a:
   1. guaranty holding.
   2. security interest.
   3. guaranty interest.
   4. good-faith guaranty.

                                           

2. Which is not an element of attachment?
   1. the filing of a financing statement
   2. a security agreement
   3. value received by the debtor
   4. the debtor has rights in the collateral

                                           

 

3. A security agreement must:
   1. identify the parties involved.
   2. contain a reasonable description of the collateral.
   3. demonstrate that the parties intended for the creditor intends to have a security interest.
   4. all of the above.

                                           

 

4. When a seller sells on credit and is given a security interest in the goods, that interest is called:
   1. a purchase money security interest.
   2. a future transaction.
   3. a floating lien.
   4. none of the above.

                                           

 

5. Whatever is received upon the sale, exchange, collection or other disposition of collateral is known as:
   1. goods.
   2. paper.
   3. proceeds.
   4. security interest.

                                           

 

6. A security interest that is effective against third persons as well as against the buyer is called a:
   1. universal security interest.
   2. prohibitive security interest.
   3. perfected security interest.
   4. protective security interest.

                                           

 

7. The concept of perfection concerns:
   1. the creation of the security interest.
   2. protection against the claims of others to the collateral.
   3. the rights of the creditor against the debtor.
   4. converting unsecured creditors into secured creditors.

                                           

 

8. Perfection of a security interest takes place:
   1. upon the creditor's possession of the collateral.
   2. upon attachment in the case of a purchase money security interest in consumer goods.
   3. upon the filing of a financing statement.
   4. all of the above.

                                           

9.                   occurs when a bank is able to require the debtor account holder to clear all transactions in that account.
   1. Control
   2. Perfection.
   3. Termination
   4. Redemption

                                           

 

10. If the collateral is in the possession of the creditor:
    1. a financing statement must be filed to perfect the interest.
    2. the security interest is perfected.
    3. only a security interest has been obtained.
    4. the type of goods will determine the method of perfection.

                                           

 

11. In most states,                         provides that a security interest in a non-inventory motor vehicle must be noted on the vehicle title registration.
    1. a non-Code statute
    2. UCC Article 2
    3. UCC Article 9
    4. judicial precedent

                                           

 

12. When a state statute requires a security interest in a motor vehicle to be noted on the certificate of title, the security interest is perfected:
    1. by the certificate notation, when a non-inventory motor vehicle is involved.
    2. by filing under the UCC, regardless of how the vehicle is classified.
    3. by filing under the UCC, when the motor vehicle is inventory.
    4. either by the certificate notation or by a UCC filing, depending on how the state statute defines the term motor vehicle.

                                           

 

13. A financing statement must provide:
    1. the name of the debtor.
    2. the name of the secured party or their representative.
    3. the covered collateral.
    4. all of the above.

                                           

 

14. What is the purpose of a financing statement?
    1. to meet UCC accounting requirements under Article 9
    2. to create a security interest
    3. to amend a security agreement
    4. to alert third persons that a creditor has a security interest in the collateral described                

15. When the filing of a financing statement is defective:
    1. the security interest is lost.
    2. the filing fails to perfect the security interest.
    3. the security interest is perfected through the court’s application of equitable principles.
    4. the public notice of the creditor’s interest is still effective.

                                           

 

16. The perfection obtained by filing a financing statement lasts for                      .
    1. five (5) years, and is renewable.
    2. five (5) years, and is non-renewable.
    3. ten (10) years, and is renewable.
    4. ten (10) years, and is non-renewable.

                                           

 

17. A(n)                           statement is a document, which may be requested by a paid-up debtor, stating that a security interest is no longer claimed under the specified financing statement.
    1. execution
    2. discharge
    3. termination
    4. hold harmless

                                           

 

18. When there are two perfected secured creditors in the same collateral:
    1. priority goes to the creditor who perfected first.
    2. priority goes to the creditor who is owed the greatest amount of money.
    3. each perfected secured creditor has a 50% interest in the collateral.
    4. Both perfected secured creditors are treated like unsecured creditors in regards to the collateral.

                                           

 

19. If a breach of the peace might occur:
    1. self-help repossession is the only option available to obtain the collateral.
    2. the creditor must use court action to obtain the collateral.
    3. the creditor is barred from repossessing the collateral.
    4. the collateral reverts to the debtor.

                                           

 

20. Upon a default by a buyer, the secured seller may resell the collateral:
    1. not less than three (3) months after the buyer's default.
    2. not less than six (6) months after the buyer’s default.
    3. only at a public sale.
    4. at either a public or a private sale.