Question 1

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

Accepted Answer

As Joe's surety, Kay is responsible for paying back the loan if Joe defaults. Therefore, Kay would have a right to be reimbursed by Joe for any payments she makes to CCI on Joe's behalf. Additionally, Kay would have any rights that CCI had against Joe, such as the right to collect payment from him. Therefore, the correct answer is C.

Question 2

Bess wishes to appeal a decision from a federal bankruptcy court.Bess must appeal to

Accepted Answer

Bess must appeal to a higher court than the bankruptcy court, which is a federal court. The next highest court in the federal system is the federal district court. Therefore, Bess must appeal to a federal district court. The other options, county court and state court, are lower courts in the hierarchy and do not have jurisdiction over federal bankruptcy cases. The U.S. Supreme Court is also a higher court, but it generally only hears cases on appeal from lower federal courts if they involve a significant legal or constitutional issue.

Question 3

Drew and Earl are brothers.They agree to act as guarantors on a loan made by their sister,Flo.Flo defaults on the payments and Drew re-fuses to pay.Earl pays the debt.Earl can recover from

Accepted Answer

Under the right of contribution, co-guarantors can recover from each other for their proportionate share of the debt that they paid. Therefore, Earl can recover from Drew under the right of contribution.

Under the right of subrogation, a party who pays a debt on behalf of another party is entitled to step into the shoes of the creditor and recover from the debtor. Therefore, Flo can be sued under the right of subrogation by Earl.

Question 4

Joe files a voluntary petition for Chapter 7 bankruptcy.His petition does not need to include

Accepted Answer

The occupations of Joe's creditors are not required to be included in a Chapter 7 bankruptcy petition. However, a list of secured and unsecured creditors and their addresses are necessary to provide a complete financial picture.

Question 5

Fact Pattern 20-1
Mary's home is in a state that has a $30,000 homestead exemption.Mary de-faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc-tion for $80,000.
-Refer to Fact Pattern 20-1.Nina may recover

Accepted Answer

Since Mary's home is in a state with a $30,000 homestead exemption, that amount of the sale proceeds would be protected from creditor claims. Therefore, Mary's debt to Nina could be satisfied up to a maximum of $50,000 ($80,000 sale price minus $30,000 homestead exemption).

Question 6

Fact Pattern 20-1
Mary's home is in a state that has a $30,000 homestead exemption.Mary de-faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc-tion for $80,000.
-Refer to Fact Pattern 20-1.If Nina recovers less than she is owed,she can realize the difference from

Accepted Answer

The homestead exemption only applies to the primary residence, so any nonexempt property that Mary owns can be used to recover the difference owed to Nina. Exempt property, such as Mary's primary residence, cannot be used to satisfy the debt. Other family members' property is also not relevant, as the debt is solely Mary's responsibility.

Question 7

Muffins-2-Go buys a truck from Street Vehicles,Inc.,under a contract signed by Riley,Muffins-2-Go's president,making him personally liable if Muffins-2-Go does not pay the loan.Riley is

Accepted Answer

Riley is personally liable if Muffins-2-Go does not pay the loan, which means he is a guarantor.

Question 8

Maggie is a surety for Juli's debt to Bill.Bill and Juli decide to make material changes to the original contract without consulting Maggie.Maggie is

Accepted Answer

As a surety, Maggie's liability only extends to the terms of the original contract. If Bill and Juli make material changes without consulting Maggie, they are essentially creating a new contract that she did not agree to. Therefore, Maggie is discharged completely from her obligations as a surety.

Question 9

Daphne defaults on a debt to Country Loan Corporation (CLC).As a creditor,CLC can place liens on all of Daphne's property except

Accepted Answer

According to the terms of the Uniform Commercial Code, motor vehicles used for personal transportation are exempt from being subject to liens by creditors. Therefore, CLC cannot place a lien on Daphne's motor vehicle used to commute to work.

Question 10

Bobby has fifteen creditors.To force Bobby into bankruptcy proceedings,at least three creditors must join the petition and their unsecured claims must add up to at least

Accepted Answer

The Bankruptcy Code requires that at least three creditors with unsecured claims totaling at least $14,425 must join the petition to force a debtor into bankruptcy.

Question 11

Wilson wants to file an ordinary,or straight,bankruptcy.Wilson should file using

Accepted Answer

Chapter 7 bankruptcy is commonly known as straight or ordinary bankruptcy, and it is the best choice for Wilson as he intends to liquidate his non-exempt assets to pay off his creditors. Chapter 11 bankruptcy is for businesses, and Chapter 13 bankruptcy is for individuals with regular income and not suitable for Wilson's situation. Filing under his state's bankruptcy code is not a viable option as bankruptcy law is federal law, and each state cannot have its own bankruptcy code.

Question 12

Fact Pattern 20-1
Mary's home is in a state that has a $30,000 homestead exemption.Mary de-faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc-tion for $80,000.
-Refer to Fact Pattern 20-1.Mary will receive

Accepted Answer

Mary will receive the homestead exemption of $30,000, and the remaining $50,000 will go towards satisfying her debt to Nina.

Question 13

Roland files for Chapter 7 bankruptcy.After all his assets have been sold and the proceeds distributed among his creditors,Roland's remaining debts

Accepted Answer

Chapter 7 bankruptcy results in the discharge of most of the debtor's remaining debts after their assets have been sold and the proceeds are distributed among creditors. This means that the debtor is no longer responsible for paying those debts.

Question 14

Gerald files a bankruptcy petition.The resulting automatic stay will apply to Gerald's

Accepted Answer

The automatic stay in bankruptcy generally halts actions by creditors to collect debts from the debtor, including car payment debts. However, it does not apply to domestic support obligations like alimony, child support, or spousal maintenance.

Question 15

William is a surety for Jeannie's loan from Richard.Richard knows of William's existence.When the loan comes due,Jeannie tries to pay Richard,but Richard rejects the payment.William is

Accepted Answer

When a creditor unjustifiably refuses payment from the principal debtor, the surety is released from their obligation.

Question 16

Denise borrows $90,000 from Clear Lake Credit Union to buy a home.Denise loses her job and fails to make payments on the mortgage,but assures Clear Lake Credit that she will soon secure a new job.The lender agrees to postpone the payments.This is

Accepted Answer

A forbearance occurs when a lender agrees to temporarily suspend or reduce loan payments due to a borrower's financial hardship, with the understanding that the borrower will eventually catch up on the payments. This is what is happening in this scenario - Denise has experienced a financial hardship (losing her job) and Clear Lake Credit Union has agreed to postpone her mortgage payments until she secures a new job. The other options (a right of redemption, a short sale, and a workout agreement) do not accurately describe the situation.

Question 17

Fact Pattern 20-1
Mary's home is in a state that has a $30,000 homestead exemption.Mary de-faults on a $60,000 debt that she owes to Nina.Mary's home is sold at auc-tion for $80,000.
-Refer to Fact Pattern 20-1.Other property Mary may own that may be ex-empt from satisfaction of judgment debts includes

Accepted Answer

The tools that Mary uses in her trade may be exempt from satisfaction of judgment debts. Each state has different exemptions, but tools used for one's occupation or trade are often protected. The other options provided (A, B, and C) do not typically qualify for exemption from judgment debts unless specifically outlined in the state's exemption statutes.

Question 18

Thirty-one days before filing a petition in bankruptcy,Dee transfers prop-erty and makes payments that favor one creditor over another.These are

Accepted Answer

Preferences are payments or transfers made by a debtor to a creditor within 90 days before filing for bankruptcy that give that creditor an advantage over other creditors. In this case, Dee made payments and transferred property to benefit one creditor over others, which qualifies as a preference. The other options (A, C, and D) are not applicable to the scenario described.

Question 19

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from First Street Motors.If,after the loan agreement is signed,Dina agrees to a higher rate of interest without telling Edie,then Edie is

Accepted Answer

Edie is discharged from the agreement because a material alteration, such as an increase in the interest rate, was made without her consent.

Question 20

Donna goes through an involuntary bankruptcy proceeding.An invol-un-tary bankruptcy occurs when

Accepted Answer

Involuntary bankruptcy occurs when a debtor's creditors force the debtor into bankruptcy proceedings. Therefore, choice C is the correct answer. Choice A refers to voluntary bankruptcy, while choices B and D describe situations that could lead to bankruptcy, but not necessarily involuntary bankruptcy.

Quiz 20: Creditors Rights and Bankruptcy

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