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Exam 25: Security Interests and Creditors Rights

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Question 1

Multiple Choice

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Lending Bank files a financing statement regarding a transaction with Metro Company. To be valid, the financing statement must contain all of the following except

A) a description of the collateral.
B) a statement of the purpose for the transaction.
C) Lending's name.
D) Metro's name.

E) All of the above
F) None of the above

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Question 2

Multiple Choice

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Credit Corporation holds a perfected security interest in Dental Clinic's real property that includes priority to the proceeds from a sale of the collateral resulting from a bankruptcy. In relation to the bankruptcy trustee, this gives the secured party

A) equal rights.
B) superior rights.
C) no rights.
D) subordinate rights.

E) All of the above
F) None of the above

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Question 3

Multiple Choice

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Credit Financing Inc. and Debt Lending Company hold security interests in property owned by Fleet Cartage Inc. Priority between these security interests is generally determined by

Reese applies for a credit card at Sell-Mart. The application gives Sell-Mart a security interest in any goods that Reese buys with the card until she pays for them in full. In this situation, the secured party is

When a security interest is perfected, it has priority over any other perfected security interests.

Because of depreciation, the amount received on the sale of collateral may be less than the amount owed on the debt, but a debtor who has defaulted is not likely to have the funds to pay the deficiency.

When two conflicting security interests are unperfected, the last to attach has priority.

Kiosk Jewelers borrows from Lender Inc. and Mortgage Company, using the same collateral. Only Mortgage Company has a perfected security interest. Kiosk defaults on both loans. The party with first rights to the collateral is

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property. This is

To make a sale to Gourmet Inc., Hill Valley Commodities asks Gourmet's outside accountant Ina to co-sign a credit application. According to the terms, if Gourmet defaults, Hill Valley can look to her for payment without first pursuing legal remedies against Gourmet. Tina is

Capital Inc. holds a security interest in Discount Retail Company's inventory. The parties agree that the interest will continue in the collateral even if it is sold, exchanged, or disposed of in some other way. This is

Barth borrows funds from City Bank to pay his tuition. His mother Debi co-signs the credit application. After the loan agreement is signed, Barth agrees to a higher rate of interest without telling Debi. She is

Today, there is no significant difference in the liability of a surety and a guarantor in any state at common law or otherwise.

Loan Company has a security interest against Manufacturing Inc. that is enforceable. In other words, with respect to the collateral, Loan's rights are said to

Equipment Company holds a lien on Fertile Farm's equipment. The equipment can be sold to satisfy the debt

Consumer Credit Inc. (CCI) lends $1,000 to Dave. Eve acts as Dave's surety. If Eve pays the loan, she gets

Bayou Financial Corporation holds a security interest in property owned by Cajun Farms. Perfection of this security interest may not protect Bayou against the claim of

Rancho West owes Silo & Barn Inc. $5,000 on their contract, but refuses to pay. To collect, Silo files a mechanic's lien, under which security for the debt is represented by

Retail Store Inc. can give Secure Loan Company a security interest in future inventory to be acquired by the debtor.

The roof in Rosalyn's house springs a leak. She contracts with Shelter Roofing & Restoration Company to repair the roof and fix the damage to the house. Rosalyn pays 10 percent of the price in advance. Shelter Roofing does the work, but Rosalyn refuses to pay the rest of the price. What can Shelter Roofing do, and how is it done?