Chapter 28 - Secured Transactions Quiz

1. Which of the following is a secured transaction?

a. Paul guarantees payment on a loan with his car.
b. Paul guarantees payment on a loan with his labor.
c. both A and B
d. none of the above

2. Al and his wife guarantee their loan from First Bank with their car. Who is the secured party?

a. Al
b. Al's wife
c. First Bank
d. both A and B

3. Carl puts up a car, which he owns fully, as collateral for a loan. He still has the car, but signs a security agreement which describes the car. He has not yet gotten value from the bank. Is there a security interest?

a. yes
b. no, because Carl still has the car
c. no, because the bank has not given value
d. both B and C

4. Who must sign a security agreement?

a. the creditor
b. the debtor
c. both the creditor and debtor
d. neither the creditor or debtor

5. Andy owns a bicycle shop. He wants to take out a loan, and needs to put up substantial collateral to get it. Which of the following may he use as collateral?

a. finished bikes that are in inventory
b. partially completed bikes
c. bikes that he plans to start and make in the future
d. all of the above

6. First Bank has a security interest in Fred's car. If he defaults on the loan, First Bank

a. will be able to seize the car no matter what.
b. will be able to seize the car if they have a perfected interest.
c. will be able to seize the car if they are the first to request it.
d. none of the above

7. A secured creditor who wishes to perfect his interest by filing must file a financing statement under the name of the _______________, and must include the address of _______________.

a. debtor; debtor
b. debtor; debtor and creditor
c. creditor; creditor
d. creditor; debtor and creditor

8. May a security interest be perfected without a filing?

a. yes, if they are actually in the creditor's possession
b. yes, if the creditor has a PMSI in the collateral
c. both A and B
d. none of the above

9. If a debtor moves to a new state, what must a secured creditor do to continue to have a perfected interest?

a. nothing
b. file in the new state immediately
c. file in the new state within four months of the move
d. they cannot perfect their interest in more than one state

10. A financing statement is valid for _______________ years. Renewal must be done within_______________ months prior to the expiration of the statement to extend this period.

a. 5; 3
b. 10; 3
c. 5; 6
d. 5; 12

11. Hal puts up his machinery as collateral for an intermittent loan arrangement. He borrows $10,000 up front, and has the right to borrow up to $100,000 more. What must the lender do to perfect their security interest?

a. execute a security agreement when the original $10,000 is borrowed
b. execute a security agreement each time a future loan is made
c. both A and B
d. none of the above

12. Which of the following parties has priority in collecting a debt?

a. a perfected secured creditor
b. an unperfected secured creditor
c. an unsecured creditor
d. a judgment creditor who has not obtained a lien

13. Which of the following has priority in collecting a debt?

a. a secured creditor that perfected its interest on June 1
b. a lien creditor who acquired his interest on April 1
c. an unperfected secured creditor who acquired his interest on March 1
d. an unsecured creditor who acquired his interest on January 1

14. Which of the following is true of situations in which a borrower sells the collateral he used to secure a loan?

a. The secured creditor's security interest usually disappears.
b. The secured creditor's security interest usually continues.
c. The secured creditor's interest disappears if they authorized the sale.
d. both B and C

15. Al puts up his car as collateral for a loan from First Bank, and First Bank perfects their security interest. He later sells his car to Mack, who has no idea that the bank has a security interest in the car. What is true?

a. First Bank still has a security interest in the car.
b. First Bank has a security interest in the cash Al received for the car.
c. both A and B
d. none of the above

16. When does perfection take place automatically?

a. when the security agreement signed by the debtor says perfection will be immediate
b. when the seller takes a purchase money security interest in the goods
c. when the seller is a merchant
d. none of the above

17. What is evidenced by chattel paper?

a. a writing that evidences a monetary obligation in specific goods
b. a writing that indicates a security interest in specific goods
c. both A and B
d. none of the above

18. When a creditor sells chattel paper to an assignee and retains the responsibility for collection, a(n) _______________ collection arrangement exists. When the assignee takes responsibility for collection, a(n) _______________ collection arrangement exists.

a. notification; indirect
b. notification; direct
c. notification; nonnotification
d. indirect; direct

19. Two parties have a complete security agreement, and many of its provisions conflict with UCC article 9. Which of the following is true?

a. The agreement will be entirely void, and the relationship will be governed by the UCC.
b. The parts of the agreement that conflict with the UCC will be void.
c. The agreement will be entirely valid.
d. The agreement will have to be redrafted.

20. When making a filing, is the date and hour of the filing recorded by the filing officer and sent to the person making the filing?

a. yes, always
b. yes, if requested, and the requesting party must pay a fee
c. yes, if requested, and no fee need be paid
d. no, never

21. How does the UCC define default?

a. as the nonpayment of credit obligations
b. as the improper resale of collateral
c. as the unlawful transfer of the location of collateral
d. none of the above

22. Al defaults on his loan, and his secured creditor seizes his car and sells it to repay the debt. What has happened?

a. execution
b. perfection
c. levy
d. none of the above

23. May a secured creditor take collateral after a default by themselves and without court supervision?

a. yes, always
b. yes, if they do not breach the peace
c. yes, if they have a PMSI
d. no, never

24. When a secured creditor resells seized collateral, what must they do?

a. sell at a public auction
b. sell in a reasonable commercial manner
c. sell at a high price
d. they have no obligations.

25. First Bank repossesses Manny's car to satisfy the remainder of a $5,000 debt. They resell the car for $6,000. Must they give Manny any of the proceeds?

a. no
b. yes, all $6,000
c. yes, $1,000
d. yes, $1,000 less costs associated with the resale