Question 1

The lender in a credit transaction is known as the ________.

Accepted Answer

The lender in a credit transaction is known as the creditor because they are the party that extends credit or loans money to another party, known as the debtor.

Question 2

Personal property that is subject to a security agreement is known as ________.

Accepted Answer

Collateral refers to personal property or assets that a borrower offers to a lender as security for a loan. If the borrower fails to repay the loan, the lender has the right to seize the collateral. This term is specifically used in the context of secured transactions, where personal property is used to secure a debt obligation. Mortgages and deeds are related to real property, not personal property, and intangible assets, while they can be used as collateral, are not synonymous with the concept.

Question 3

Max borrowed money from Mabel. Max would be considered the ________.

Accepted Answer

A debtor is someone who owes money to another person or entity. Since Max borrowed money from Mabel, Max is the one who owes money, making him the debtor.

Question 4

In making a decision of whether to issue a loan to a consumer, an unsecured creditor may consider a number of factors. Which of these is NOT a factor that a creditor would normally consider?

Accepted Answer

The consumer's voting history is not relevant to their financial reliability or ability to repay a loan, unlike their credit history, income, and other assets, which are standard considerations for creditors.

Question 5

Michael has borrowed $100,000 from his bank. If Michael fails to make payments on his loan, the bank can sue Michael. However, because Michael has no income and owns no property, if the bank sues Michael, the bank will never collect. Michael is considered to be ________.

Accepted Answer

The answer of Michael has borrowed $100,000 from his bank....

Question 6

Bonnie made the final payment to Big Bank on the 30-year mortgage loan she had on her home. Shortly thereafter Big Bank, to prove that the mortgage has been paid, filed a satisfaction of a mortgage with ________.

Accepted Answer

The correct place to file a satisfaction of mortgage, which is a document indicating that the borrower has paid off their mortgage in full, is with the county recorder's office. This office keeps public records of real estate transactions, including mortgages and their releases, within the specific county where the property is located.

Question 7

A satisfaction of a mortgage is also called a(n) ________.

Accepted Answer

A satisfaction of a mortgage is also known as a reconveyance. This term refers to the process by which the lender formally recognizes that the borrower has paid off the mortgage in full, thereby reconveying or transferring the title of the property back to the borrower free and clear of the mortgage lien.

Question 8

A debtor who does not make the required payments on a secured real estate transaction is considered to be ________.

Accepted Answer

A debtor who does not make the required payments on a secured real estate transaction is considered to be in default. This means the debtor has failed to meet the legal obligations of the loan agreement.

Question 9

A default by a debtor in a secured real estate transaction may trigger a legal court action for ________.

Accepted Answer

Foreclosure is the legal process by which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

Question 10

If the mortgagee's or lienholder's foreclosure action in court is successful, the court will issue a judgment that orders ________.

Accepted Answer

When a mortgagee's or lienholder's foreclosure action in court is successful, the court issues a judgment that orders the real property to be sold at a judicial sale. This is done to satisfy the debt owed by the debtor.

Question 11

Any surplus funds following a judicial sale must be ________.

Accepted Answer

After a judicial sale, any surplus funds are typically paid to the mortgagor or owner. This is because the sale is meant to cover the debt owed to the mortgagee, and any excess beyond that debt is rightfully the property of the original owner or mortgagor.

Question 12

Describe the right of redemption and when it can be exercised.

Accepted Answer

The answer of Describe the right of redemption and when...

Question 13

A ________ transaction occurs when a seller sells goods to a buyer who has obtained financing from a third-party lender that takes a security interest in the goods sold.

Accepted Answer

A three-party secured transaction involves a seller, a buyer, and a third-party lender who provides financing and takes a security interest in the goods sold.

Question 14

In order to help his daughter Pamela secure a loan for her new business, Rich promised the bank that he would also be liable for the payment of Pamela's loan. Which of these is NOT a term that describes Rich's role in this transaction?

Accepted Answer

Rich's role is not described as "security." In this context, "security" refers to an asset provided to guarantee the loan, not a person who promises to pay the loan if the primary borrower fails to do so. Rich acts as a surety, accommodation party, or co-signer, all terms that describe someone who guarantees the payment of another's debt.

Question 15

In order to help his daughter Pamela secure a loan for her new business, Rich promised the bank that he would pay his daughter's loan if she defaults and does not pay the debt when it is due. Rich would be considered a(n) ________.

Accepted Answer

Rich would be considered a guarantor because he has promised to fulfill the obligation of paying the loan only if Pamela defaults on her payment. Guarantors provide a guarantee to pay the debt of another if the original debtor fails to do so.

Question 16

The law that substantially amended federal bankruptcy law to make it much more difficult for debtors to escape unwanted debt through bankruptcy was the ________.

Accepted Answer

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 significantly amended the U.S. bankruptcy code, making it harder for individuals to file for bankruptcy under Chapter 7 and discharge their debts.

Question 17

The federal government official who has responsibility for handling and supervising many of the administrative tasks associated with a bankruptcy case is the ________.

Accepted Answer

The U.S. Trustee is responsible for overseeing and supervising many of the administrative tasks in bankruptcy cases, including monitoring the conduct of bankruptcy parties and overseeing related administrative tasks.

Question 18

One day, while playing a round of golf at Flosswood Country Club, bankers Tinkers, Evers and Chance realized that each of their banks had given unsecured loans to Max Duffer for $100,000 and that Max has defaulted on each of the loans. Which of these strategies might the three bankers take with regards to Max Duffer?

Accepted Answer

Bankers Tinkers, Evers, and Chance can file an involuntary petition for bankruptcy against Max Duffer with the bankruptcy court since he has defaulted on his loans. This action is taken by creditors in an effort to recoup what they are owed.

Question 19

In a Chapter 11 business reorganization form of bankruptcy, appointment by the bankruptcy court of a bankruptcy trustee ________.

Accepted Answer

In a Chapter 11 bankruptcy, the court may appoint a trustee if there is evidence of fraud, dishonesty, incompetence, or gross mismanagement by the current management of the business. This is not a mandatory action but is at the discretion of the court based on the circumstances presented.

Question 20

Fast Eddie tells you that he thinks he has everything worked out. Eddie owes over $50,000 to debtor, and while he owns practically no assets, he does have a baseball card collection worth $100,000. Eddie tells you that he plans on giving his baseball card collection as a gift to his cousin on Sunday, and then file for bankruptcy on Monday. Eddie tells you, "That way those creditors will get practically nothin'! Ha!"Is Eddie right? Is there a provision of the Bankruptcy Code that might dash Eddie's plan?

Accepted Answer

The answer of Fast Eddie tells you that he thinks...

Quiz 13: Credit, Secured Transactions, and Bankruptcy