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Exam 32: Credit and Security

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Question 31

Multiple Choice

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Lenders 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) Lenders' name.
D) Metro's name.

E) A) and B)
F) None of the above

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Question 32

Multiple Choice

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Ralph is a surety for Susie's loan from Town Credit Inc. Ralph's right to "step into the shoes" of Town Credit, after paying Susie's debt, and exercise any of the creditor's rights against Susie is the right of

A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

E) A) and D)
F) A) and C)

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Question 33

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Federal law provides a framework to protect debtors from losing all their income in order to pay judgment debts.

Building Company adds a warehouse to the property of Corporate Complex, but the owner does not pay. Building files a lien on Corporate's property. The property

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

Nell's debt to Olsen is past due. Olsen obtains an order of garnishment to require Nell's employer Pro Service, Inc., to pay part of Nell's paycheck to Olsen. The law

A party who owes payment or performance of a secured obligation is a secured party.

To create an enforceable security interest between Mortgage Bank and National Property Company with a written security agreement, the agreement must be signed by

Every interest in personal property that guarantees the payment or performance of an obligation is a security interest.

Fact Pattern 32-1 Petro Refinery asks Quality Bank for a loan to increase its inventory. Quality requires Rob, Petro's president, to sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to make a sale of refined oil to Slick Lubricants Inc., Petro asks Slick's outside accountant Tina to co-sign a credit application. Refer to Fact Pattern 32-1. Rob is a guarantor. The guaranty is required to be in writing because

Secure Credit Inc. holds a security interest in inventory owned by Timber Products Inc. Secure can protect its claim to the inventory in the event Timber uses the inventory for a loan from another creditor by

Kyle is a surety for Loren's loan from Metro Bank. Kyle's right to be reimbursed by Loren after having paid her debt is the right of

Generally, the surety or guarantor cannot avoid liability on the obligation with a defense that is available to a principal debtor.

The first security interest to be perfected is the last in priority over other perfected security interests.

Bayside Marina borrows funds from Credit Union secured by Bayside's equipment in the marina shops. If Credit Union fails to perfect its claim to the collateral, the claim will be reduced to that of

A third party who agrees to be primarily responsible for the debt of another is a surety.

Rashi is a student at State University. In need of funds to pay for tuition and books, Rashi asks Tiempo Loans, Inc., for a short-term loan. The lender agrees to make a loan if Rashi will have someone who is financially responsible guarantee the loan payments. Umberto, a well-known businessperson and a friend of Rashi's family, calls Tiempo and agrees to pay the loan if Rashi cannot. Because of Umberto's reputation, the loan is made. Rashi is making the payments, but because of illness he is unable to work for one month. He asks Tiempo to extend the loan for three months. The lender agrees, raising the interest rate for the extended period. Umberto is not notified of the extension (and thus does not consent to it). One month later, Rashi drops out of school. All attempts to collect the remainder of the loan from Rashi fail. Can Tiempo assert a claim against Umberto on the debt?

A security interest can cover property in which the debtor has future rights.

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

Debt Financing Inc. and Equity Lending Company are secured parties with perfected security interests in property owned by Fleet Shipping Inc. Priority between these security interests is generally determined by