Question 1

Liu and Midge-Nero's creditors-contract with Nero for the discharge of Nero's liquidated debts on payment of a lesser sum. This is
A) a composition agreement.
B) a subrogation.
C) a suretyship agreement.
D) in violation of most states' laws.

Accepted Answer

This is a composition agreement, where the creditors agree to discharge Nero's debts on payment of a reduced sum. A subrogation involves one party taking over the rights of another, and a suretyship agreement involves a third party guaranteeing the debt of another. It is not stated that this agreement violates any laws.

Question 2

Rita is a surety for Serena's loan from Title Lenders, Inc. Rita's right to "step into the shoes" of Title Lenders, after paying Serena's debt, and exercise any of the Title Lenders's rights against Serena is the right of
A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

Accepted Answer

The right to "step into the shoes" of the lender after paying off the debt is known as subrogation. Therefore, choice D is the correct answer. Contribution refers to sharing the responsibility of paying a debt among multiple parties. Redemption is the act of repurchasing something, such as property, after it has been sold due to non-payment. Reimbursement is the act of being reimbursed or compensated for expenses paid out of pocket.

Question 3

Kyla's debt to Lark is past due. Lark obtains an order of garnishment to require Kyla's employer My Pi Pizza Restaurant to pay part of Kyla's paycheck to Lark. The law
A) limits the amount that can be taken from Kyla's take-home pay.
B) permits My Pi to dismiss Kyla because her wages are garnished.
C) practically does not allow Lark to collect the awarded amount.
D) requires My Pi to retain Kyla as an employee until the debt is paid.

Accepted Answer

The law limits the amount that can be taken from Kyla's take-home pay through garnishment. This is typically a percentage of her disposable earnings, which is determined by state law. Additionally, there are laws that prevent employers from firing an employee solely because their wages are garnished. Therefore, choices B and D are not correct. While it may be difficult for Lark to collect the full amount owed, it is not practically impossible, so choice C is not correct.

Question 4

Doral, Eduard, and Francesca are co-sureties of Glenda's debt to Hi-Credit Company. Doral pays Glenda's entire debt. Doral's right to seek proportionate payments from Eduard and Francesca is the right of
A) contribution.
B) redemption.
C) reimbursement.
D) subrogation.

Accepted Answer

According to the given scenario, Doral has paid the entire debt of Glenda, which essentially means that he has fulfilled Glenda's obligation towards Hi-Credit Company. Now, as per the principle of contribution, each co-surety is liable to contribute proportionately towards the payment made by any one of them. Therefore, Doral has the right to seek proportionate payments from Eduard and Francesca, which is the right of contribution. Option A is the correct choice. Redemption means the right to repurchase property by paying off a debt, reimbursement means the repayment of expenses incurred by someone else, and subrogation is the substitution of one person or entity in place of another in a legal matter.

Question 5

Ronda's debt to Skye is past due. Skye brings a legal action against Ronda to collect the debt. To ensure that a judgment in Skye's favor will be collectible, Skye asks the court to order the seizure of Ronda's property. Exempt from such an order in most states would be
A) all of Ronda's real property.
B) as much of Ronda's real property as Ronda opts to exempt.
C) none of Ronda's real property.
D) Ronda's family home in its entirety or up to a specified amount.

Accepted Answer

In most states, Ronda's family home is exempt from seizure up to a specified amount, known as a homestead exemption. However, all of Ronda's other real property is subject to seizure if ordered by the court. The amount of the homestead exemption varies by state.

Question 6

Rosa and Sally agree to guarantee Timon's debt. Rosa's maximum liability is $30,000, and Sally's is $20,000. Timon owes $20,000 and is in default. Rosa pays the creditor the entire amount. In the absence of an agreement to the contrary, Rosa can recover from Sally
A) $8,000.
B) $10,000.
C) $20,000.
D) 0.

Accepted Answer

The answer of Rosa and Sally agree to guarantee Timon's...

Question 7

Francie's debt to Gage is past due. Gage brings a legal action against Francie to collect the debt. To ensure that a judgment in Gage's favor will be collectible, Gage asks the court to order the seizure of Francie's property. This is a request for
A) a guaranty (or suretyship) contract.
B) an order that would violate most state laws.
C) a writ of attachment.
D) an order of receivership.

Accepted Answer

Gage is requesting a writ of attachment, which is a court order that enables him to seize Francie's property to ensure that a judgment in his favor will be collectible. This is a common remedy for collectors of past due debts. Option A is incorrect because a guaranty contract is a separate type of contract that involves a promise to pay if the debtor defaults. Option B is incorrect because a writ of attachment is a legally recognized collection method in many states. Option D is incorrect because an order of receivership is a separate legal action that involves the appointment of a third-party receiver to manage a company's assets.

Question 8

Fact Pattern 28-1A 
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory. Estimable requires Flair, Dollar Value’s president, sign a personal guaranty to pay the debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value, Gina asks Harper to co-sign a credit application.
-Refer to Fact Pattern 28-1A. If Harper signs the application only after language is included that requires Dollar Value to exhaust its legal remedies against Gina before looking to her, then Harper is
A) a surety.
B) a lienor.
C) a guarantor.
D) a creditor.

Accepted Answer

By signing the credit application with the requirement that Dollar Value exhaust its legal remedies against Gina before looking to Harper, Harper is acting as a guarantor. A guarantor is someone who agrees to pay back a debt if the original borrower defaults, but only after the creditor has attempted to collect from the borrower first.

Question 9

Fact Pattern 28-1A 
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory. Estimable requires Flair, Dollar Value’s president, sign a personal guaranty to pay the debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value, Gina asks Harper to co-sign a credit application.
-Refer to Fact Pattern 28-1A. If Harper signs the application but fails to condition her signature on Dollar Value's agreement to pursue its legal remedies against Gina before looking to her, then Harper is
A) a surety.
B) a lienor.
C) a guarantor.
D) a creditor.

Accepted Answer

Harper would be a surety because she is agreeing to be liable for the debt of another (Gina) in case of default.

Question 10

Fact Pattern 28-1A 
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory. Estimable requires Flair, Dollar Value’s president, sign a personal guaranty to pay the debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value, Gina asks Harper to co-sign a credit application.
-Refer to Fact Pattern 28-1A. If Flair is a guarantor, then the guaranty is required to be in writing because of
A) the debtor's right of redemption.
B) the co-signer's right of contribution.
C) the creditor's transfer of possession.
D) the Statute of Frauds.

Accepted Answer

The Statute of Frauds requires certain contracts, including guaranty agreements, to be in writing to be enforceable.

Question 11

Pruit performs a contract with Quint to reshingle the roof on Quint's house, but Quint does not pay. Pruit notifies Quint that the property will be sold to satisfy the debt. This is
A) a judicial lien.
B) a mechanic's lien.
C) an artisan's lien.
D) a violation of most state laws.

Accepted Answer

This is a mechanic's lien, which is a type of lien placed on a property to secure payment for work done on that property. It is typically used by contractors and suppliers who have not been paid for work or materials provided for the property.

Question 12

Diego performs a contract with Elwood to add a swimming pool to Elwood's property, but Elwood does not pay. Diego can file a lien on Elwood's property if, from the last date labor or materials were provided, he acts
A) immediately.
B) within 60 to 120 days.
C) within two years.
D) within a reasonable time.

Accepted Answer

In most states, the deadline for filing a lien is 60-120 days from the last date labor or materials were provided. Therefore, choice B is the best answer.

Question 13

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets, which Ewing still possesses. Ewing's lien on the sets will terminate
A) if Ewing continues to maintain possession.
B) if Ewing does not file a written notice of lien within thirty days.
C) if Ewing voluntarily surrenders possession.
D) within thirty days.

Accepted Answer

Ewing's lien on the sets will only terminate if they voluntarily surrender possession. Continuing to maintain possession or filing a written notice of lien would help enforce the lien, while the time frame of thirty days is not relevant in this scenario.

Question 14

Laurel defaults on a loan owed to Maverick Bank. As a creditor, Maverick may attempt to place liens on all of Laurel's property except
A) motor vehicles used to commute to work.
B) stock in various corporations.
C) items that Laurel selects.
D) vacant commercial property.

Accepted Answer

According to the homestead exemption law, motor vehicles used to commute to work are exempt from liens by creditors. The other options listed do not have the same exemption.

Question 15

Residence Painting Company has a claim against Stuart's property to satisfy a debt that takes priority over other claims against the same property. This is
A) a lien.
B) a violation of most state laws.
C) a writ of attachment.
D) a garnishment.

Accepted Answer

A claim against a property to satisfy a debt is called a lien. A lien is a legal right or interest held by a creditor in a debtor's property, that stays with the property until the debt is paid off. It takes priority over other claims against the same property, making it an important tool for creditors to secure payment.

Question 16

Speedy Delivery Company buys a white van from Tom's Terrific Vehicles, on credit under a guaranty signed by Ulysses, Speedy's president, making him personally liable if Speedy does not pay. Ulysses is
A) a surety.
B) a lienor.
C) a guarantor.
D) a creditor.

Accepted Answer

Ulysses is a guarantor because he is personally liable if Speedy does not pay, but he is not the primary obligor (which would make him a debtor) or a co-obligor (which would make him a surety).

Question 17

Ping's debt to Oak Furniture Warehouse is past due. Oak obtains a judgment against Ping, but Ping refuses to pay it. Oak asks the court for an order that directs the sheriff to seize and sell any of Ping's nonexempt real or personal property that is within the court's geographic jurisdiction. This is a request for
A) a writ of execution.
B) a composition agreement.
C) an order that would violate most state laws.
D) an order of garnishment.

Accepted Answer

Oak is seeking a writ of execution, which is a court order directing the sheriff to seize and sell nonexempt property to satisfy the judgment debt. A composition agreement is an agreement between a debtor and creditors to settle debts outside of court, and an order of garnishment applies to a debtor's wages or bank accounts, not property. Option C is incorrect as the court order being sought is a legally recognized method of enforcing a judgment.

Question 18

Sydney borrows money from Rite Now Loan Company. For Rite Now to obtain a writ of execution, Sydney must
A) be unable or refuse to pay the amount of a judgment.
B) be unable to redeem Sydney's exempt property.
C) notify Rite Now in writing (in a "writ") of his intent.
D) surrender possession of his property to a court.

Accepted Answer

A writ of execution is a court order that allows a creditor to seize a debtor's assets in order to satisfy a judgment. In order for Rite Now to obtain a writ of execution against Sydney, Sydney must either be unable or refuse to pay the amount of the judgment that he owes to Rite Now.

Question 19

Fact Pattern 28-1A 
Dollar Value Motors asks Estimable Bank for a loan to increase its vehicle inventory. Estimable requires Flair, Dollar Value’s president, sign a personal guaranty to pay the debt if Dollar Value defaults. Meanwhile, to buy a pick-up truck from Dollar Value, Gina asks Harper to co-sign a credit application.
-Refer to Fact Pattern 28-1A. If, after the loan agreement is signed, Gina agrees to a higher rate of interest without telling Harper, then Harper is
A) discharged from the agreement.
B) liable at the higher rate of interest.
C) liable at the lower rate of interest.
D) liable for the principal only.

Accepted Answer

The answer of Fact Pattern 28-1A 
Dollar Value Motors asks...

Question 20

Flip's debt to George is past due. George brings a legal action against Flip to collect the debt. George asks the court to order Home Bank, in which Flip has an account, to pay a portion of the funds to George. This is a request for
A) a writ of execution.
B) an order of garnishment.
C) an order that would violate most state laws.
D) an artisan's lien.

Accepted Answer

George is requesting an order of garnishment, which is a legal order that requires a third party (in this case, Home Bank) to withhold funds from a debtor's account and pay them directly to the creditor (George). This is a common method used to collect past due debts.

Quiz 28: Creditors Rights and Remedies

Liu and Midge-Nero's creditors-contract with Nero for the discharge of Nero's liquidated debts on payment of a lesser sum. This is

Rita is a surety for Serena's loan from Title Lenders, Inc. Rita's right to "step into the shoes" of Title Lenders, after paying Serena's debt, and exercise any of the Title Lenders's rights against Serena is the right of

Kyla's debt to Lark is past due. Lark obtains an order of garnishment to require Kyla's employer My Pi Pizza Restaurant to pay part of Kyla's paycheck to Lark. The law

Doral, Eduard, and Francesca are co-sureties of Glenda's debt to Hi-Credit Company. Doral pays Glenda's entire debt. Doral's right to seek proportionate payments from Eduard and Francesca is the right of

Ronda's debt to Skye is past due. Skye brings a legal action against Ronda to collect the debt. To ensure that a judgment in Skye's favor will be collectible, Skye asks the court to order the seizure of Ronda's property. Exempt from such an order in most states would be

Rosa and Sally agree to guarantee Timon's debt. Rosa's maximum liability is $30,000, and Sally's is $20,000. Timon owes $20,000 and is in default. Rosa pays the creditor the entire amount. In the absence of an agreement to the contrary, Rosa can recover from Sally

Francie's debt to Gage is past due. Gage brings a legal action against Francie to collect the debt. To ensure that a judgment in Gage's favor will be collectible, Gage asks the court to order the seizure of Francie's property. This is a request for

Pruit performs a contract with Quint to reshingle the roof on Quint's house, but Quint does not pay. Pruit notifies Quint that the property will be sold to satisfy the debt. This is

Diego performs a contract with Elwood to add a swimming pool to Elwood's property, but Elwood does not pay. Diego can file a lien on Elwood's property if, from the last date labor or materials were provided, he acts

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets, which Ewing still possesses. Ewing's lien on the sets will terminate

Laurel defaults on a loan owed to Maverick Bank. As a creditor, Maverick may attempt to place liens on all of Laurel's property except

Residence Painting Company has a claim against Stuart's property to satisfy a debt that takes priority over other claims against the same property. This is

Speedy Delivery Company buys a white van from Tom's Terrific Vehicles, on credit under a guaranty signed by Ulysses, Speedy's president, making him personally liable if Speedy does not pay. Ulysses is

Sydney borrows money from Rite Now Loan Company. For Rite Now to obtain a writ of execution, Sydney must

Flip's debt to George is past due. George brings a legal action against Flip to collect the debt. George asks the court to order Home Bank, in which Flip has an account, to pay a portion of the funds to George. This is a request for