Question 1: The City of Melonville hires Ace Construction Company to build its new City Hall. Integrity Insurance agrees to be liable for Ace's performance of its contract. The City of Melonville has Integrity and Ace both sign the contract which provides that Ace and Integrity will be “jointly and severally” liable for the performance. Which of the following statements regarding the contract is most accurate?
A) Integrity is acting as a guarantor.
B) Integrity can only be held to his guarantee after Ace defaults.
C) Integrity is acting more as a surety than a guarantor.
D) Both A and B.
Question 2: Which of the following makes the promisor a surety rather than a guarantor?
A) "I promise to pay D's debt in the event that D first defaults."
B) "I promise to pay D's debt and am primarily liable along with D on that debt."
C) Both of the above.
D) Neither of the above.
Question 3: Which of the following is true of a guaranty (as opposed to suretyship) relationship?
A) The guarantor is primarily liable along with the principal debtor.
B) A guarantor must be compensated.
C) A contract of guaranty must be written or it is not enforceable.
D) A guarantor has no right of subrogation.
Question 4: Deb borrows $10,000 Carl, using her deposit account at Big Bank as collateral. How can Carl perfect his interest in the account?
A) Filing a financing statement in the appropriate public office.
B) Becoming Big Bank's customer for the deposit account.
C) Agreeing with Big Bank and Deb that the bank will comply with his instructions regarding funds in the account.
D) Both B and C..
Question 5: Which of the following is most likely to be perfected by the secured party's possession of the collateral?
A) A security interest in inventory.
B) A security interest in consumer goods.
C) A security interest in general intangibles.
D) A security interest in equipment.
Question 6: A secured creditor repossesses the collateral from the debtor and sells it to satisfy the debt. Which of the following has the first claim on the proceeds of the sale?
A) Satisfaction of the debt itself.
B) Consequential damages suffered by the creditor due to the debtor's default.
C) Court costs.
D) Expenses of repossessing, storing, and selling the collateral.
Question 7: Secured Party perfects its security interest in the collateral by filing on January 10. In a contest for that collateral, which of the following parties will Secured Party defeat?
A) Another secured party who perfected on January 2.
B) A party who gets a mechanic's lien on the collateral on January 12.
C) A buyer of the collateral in the ordinary course of business who buys on January 12.
D) None of the above.
Question 8. Fanny and her husband Fred own a farm in Iowa. Unfortunately, after earning a $50,000 income on the farming operation and $10,000 in non-related endeavors in 2002, Fanny and Fred accumulated $100,000 in farm-related debt. Their only other debt is a $10,000 on a truck purchased in 2001. Fanny and Fred want to file for a Chapter 12 plan. Which of the following statements is most accurate?
A) Fanny and Fred do not qualify for protection under Chapter 12.
B) Fanny and Fred will probably not be able to remain in possession of their farm under the plan.
C) A trustee will be allowed sell unnecessary assets such as equipment.
D) A trustee will not be appointed under the plan.
Question 9: A bankruptcy petition under chapter 7:
A) Can only be filed by the debtor.
B) Can only be filed by the debtor's creditors.
C) Can only be filed by the trustee.
D) Can be filed either by the debtor or his creditors.
Question 10. Dorian, an attorney who has extravagant tastes and a charming personality, often buys goods and services on credit. However, he does not pay his debts as they become due. He has six creditors. One of his creditors, Wilde Interiors, wants to file an involuntary petition to declare Dorian bankrupt. Which of the following statements is most accurate?
A) Wilde Interiors will have to have at least two more of Dorian's creditors sign the petition..
B) Wilde Interiors will have to have a valid claim against Dorian exceeding the value of any security it holds by $12,300.
C) Wilde Interiors cannot force Dorian into bankruptcy because he is a professional.
D) Dorian will have to be insolvent before the involuntary petition can be filed