Question 1 If a bank makes a loan based on its borrower's signature alone the loan is secured. True False Question 2 A creditor's security interest attaches to a debtor's property. True False Question 3 If a bank makes a loan to a business to buy new printing equipment, the printing equipment is the only property the bank would be entitled to take a security interest in. True False Question 4 Walter Jones dba LawnmowerWorld obtained a line of credit from MidPrairie Bank and signed a security agreement on behalf of the business identifying all present and future inventory as part of the security for the loan. The bank has a floating security interest. True False Question 5 To obtain priority in a debtor's property used as security, a creditor has to perfect its security interest. True False Question 6 Different kinds of property require different ways to perfect security interests in them. Real property requires recording of a deed of trust with the County Recorder; most tangible personal property, with filing a UCC-1 with the Secretary of State; chattel paper, stocks, bonds, negotiable instruments, etc., with possession by the creditor; and vehicles (automobiles, trailers, mobile homes), with filing with the DMV. True False Question 7 Central Bank filed a financing statement with the Secretary of State but misspelled the creditor's name "Eliott" instead of "Elliot." Elliot filed for bankruptcy and Central Bank made a claim as a secured party. The Bankruptcy Trustee moved the Court to set aside the bank's allegedly secured claim on the ground the bank had an unperfected security interest. The Court correctly found the bank's interest was indeed unsecured. True False Question 8 Two creditors have security interests in the same debtor property. One is owed $300,000 and the other $200,000. There are no other creditors. Both debtors agree to seize the property and sell it with the one with the higher priority to be paid first. The property sells for $400,000. Only one of the debtors will get paid in full from the sale. True False Question 9 "Commercially reasonable manner" is the standard for selling debtor property seized by a creditor for nonpayment of a secured loan. True False Question 10 Existing property, after-acquired property and future advances of the debtor can properly be used as security for a loan. True False Question 11 A security interest automatically attaches to loans for consumer goods, meaning the security interest is perfected without the need to file a UCC-1 with the Secretary of State. True False Question 12 Equipment, inventory and rights of a debtor due under a contract are typical objects of security interests. True False Question 13 A mechanics lien involves personal property. True False Question 14 An artisans lien is perfected by recording. True False Question 15 An unsecured lender can sue the borrower in the event of the borrower's default but cannot seize or foreclose on any property purchased with the unsecured loan. True False Question 16 A judgment creditor can obtain an Abstract of Judgment (a form issued by the court clerk) and record it in counties where the judgment debtor may have real property. If the borrower sells real property in a county where the abstract is recorded sale proceeds will be used to pay off all or part of the judgment ahead of the judgment debtor receiving any sale proceeds. True False Question 17 Furniture, fixtures and equipment of a borrower cannot be the object of a security interest. True False Question 18 A lien gives the lienholder rights in property that can be exercised in the event of default. True False Question 19 Security agreements are used in personal property transactions while deeds of trust are used in real property transactions. True False Question 20 Even if a prior lender has a security interest in after-acquired property of a borrower a later lender who gives notice of a new loan to the prior lender can obtain a first priority security interest in the after-acquired goods being purchased with the new loan. True False Question 21 The purpose of bankruptcy law is to provide debt relief to those who qualify for it. True False Question 22 By filing for bankruptcy every debtor is entitled to an Automatic Stay (that immediately upon filing stops creditors collection efforts, including lawsuits and foreclosures, against the debtor). True False Question 23 If a secured creditor of a debtor in bankruptcy is not adequately protected (e.g., the collateral has no equity and the security interest is diminishing in value) the secured creditor is entitled to relief from the automatic stay and can move the court to lift the stay. If the court grants the motion for relief from automatic stay, the secured party can then foreclose on the collateral. True False Question 24 Chapter 7 provides for readjustment of debt. True False Question 25 Chapter 13 is a liquidation action. True False Question 26 A Chapter 7 trustee sells exempt assets of the debtor. True False Question 27 Chapter 11 deals with reorganization. True False Question 28 Chapter 13 bankruptcies are for individuals and allow them to pay some or all of their debts in 3 or 5 years under a court-approved plan. True False Question 29 Within a few weeks of filing for bankruptcy each debtor has to face a Meeting of Creditors conducted by a bankruptcy trustee where the debtor is asked questions under oath by his creditors about his finances. True False Question 30 The sale proceeds of a Chapter 7 debtor's bankruptcy estate (his non-exempt property) generally are used (1) for administrative costs of the bankruptcy, (trustees fees [costs of liquidation (sale)] --and attorney fees), and next, if sums remain (3) for prorated payments of claims of unsecured creditors. True False Question 31 Chapter 7 is for individuals and businesses. Individuals must pass a Means Test to maintain a Chapter 7; Chapter 13s are for individual wage earners only -- not businesses -- who cannot pass the Means Test and who readjust their debt in a court-approved plan (for full or partial repayment over time) based on their disposable income and, in executing the plans, transfer funds (typically monthly) to the Chapter 13 Trustee who in turn makes payments to creditors under a 3 or 5-year plan; Chapter 11s are mostly for businesses (and a very small percentage of high-income/large debt individuals) to reorganize their debt under a court-approved plan for an indefinite period while the businesses are run by the debtor itself (Debtor-in-Possession), unless it is shown that the business is mismanaged, then the US Trustee takes it over. True False Question 32 If readjustment plans under Chapter 13 or reorganization plans under Chapter 11 fail, the debtors may convert to a Chapter 7 liquidation. CHAPTER 11s may convert to 7s or liquidate in the 11. True False Question 33 What kind of an interest in property of a bankruptcy debtor can lead to the creditor foreclosing on the property? a unsecured b secured c unperfected security interest d none of the above Question 34 What kind of a transfer by a bankruptcy debtor can be set aside for the benefit of all of his creditors? a a transfer to a single creditor more than a year prior to filing for bankruptcy b a transfer to a non-insider more than 90 days prior to filing for bankruptcy c a preferential transfer d none of the above Question 35 Judgments against the debtor can be discharged (eliminated) through bankruptcy except in certain cases of a fraud b breach of trust c drug or alcohol related injuries caused by the debtor to others d all of the above Question 36 Student loan debt is non-dischargeable in bankruptcy a absent a showing of extreme hardship. b under any circumstance c all of the above d none of the above Question 37 Discharged debtors cannot file for Chapter 7 protection after their Chapter 7 discharge for 8 years from the original filing that led to the discharge. True False Question 38 One purpose of bankruptcy is to give a debtor a fresh start. True False Question 39 With court approval a debtor can reaffirm a debt, and as a consequence, he will renew his obligation to pay that debt to the creditor even though it could have been discharged through bankruptcy. A decision to reaffirm can arise out of moral obligation or for practical reasons to continue to maintain (and not to lose) an important business relationship. True False Question 40 If a bankruptcy debtor fails to list all of his creditors in his bankruptcy Schedules, the unlisted creditor may take steps to collect the debt. True False Question 41 If a foreclosing creditor is unaware of his debtor's bankruptcy filing, he is still liable for violating the automatic stay. True False Question 42 A party to a Chapter 11 case can get out of (cancel) existing contracts. True False Question 43 A judge can cram down a Chapter 11 reorganization plan despite opposition by creditors. True False Question 44 A Chapter 7 trustee in bankruptcy has several powers but cannot successfully move the court to declare a creditor's unperfected security interest. True False Question 45 Misfeasance by a debtor-in-possession can lead to a takeover of the business by the US Trustee. True False