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Exam 30: Secured Transactions

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Question 1

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Which of the following is true regarding a security interest in consumer goods?

A) A financing statement must be filed in order to perfect a security interest in consumer goods.
B) Under federal consumer protection legislation, a seller may not hold a security interest in consumer goods.
C) Under most state laws, a seller may not hold a security interest in consumer goods.
D) When a creditor sells a consumer good to a debtor on a credit basis, the security interest perfects automatically.
E) When a creditor sells a consumer good to a debtor on a credit basis, the security interest is perfected by the seller's possession.

F) B) and D)
G) All of the above

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Question 2

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Which of the following is true regarding priority in a dispute involving a purchase-money security interest in business goods other than inventory?

A) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 20 days of the debtor's possession of the collateral.
B) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 30 days of the debtor's possession of the collateral.
C) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 40 days of the debtor's possession of the collateral.
D) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 45 days of the debtor's possession of the collateral.
E) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 60 days of the debtor's possession of the collateral.

F) D) and E)
G) B) and C)

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Question 3

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Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

Collateral is the property that is subject to a security interest.

Set forth the steps that a creditor must take to become a secured party.

What does the UCC provide regarding protection in movable collateral that is moved from one state to another?

When a debtor sells collateral, he or she receives ____, something that is exchanged for collateral.

Under the UCC, a secured party's interest in proceeds lasts for ______ after the debtor receives the proceeds.

Which of the following is true under the UCC regarding a security interest in collateral that has been perfected in one state when the collateral is moved to another state?

A ______ is a person or party that has an obligation to the secured party.

Which of the following articles of the UCC governs secured transactions in personal property?

"Repossession." Tina sold used vehicles. She sold a used pick-up truck to Joan and a used convertible to Barry. She properly obtained a security interest in both vehicles. Both Joan and Barry defaulted on payments owed to Tina for the vehicles. Tina was under the belief that her only option was to take possession of the collateral. Tina decided that she would repossess Joan's pick-up at Joan's house. Therefore, Tina slipped into the driveway one evening at midnight and started the engine. Joan immediately ran out and confronted Tina. Tina shoved Joan away and drove off in the pick-up truck. Tina was able to repossess Barry's convertible in a public parking lot with no altercation with him. -Which of the following is true regarding Tina's taking possession of Barry's convertible?

"Repossession." Tina sold used vehicles. She sold a used pick-up truck to Joan and a used convertible to Barry. She properly obtained a security interest in both vehicles. Both Joan and Barry defaulted on payments owed to Tina for the vehicles. Tina was under the belief that her only option was to take possession of the collateral. Tina decided that she would repossess Joan's pick-up at Joan's house. Therefore, Tina slipped into the driveway one evening at midnight and started the engine. Joan immediately ran out and confronted Tina. Tina shoved Joan away and drove off in the pick-up truck. Tina was able to repossess Barry's convertible in a public parking lot with no altercation with him. -Which of the following is true regarding Tina's repossession of the pick-up truck?

Assuming a purchase-money security interest is not involved, which of the following is true regarding priority when there are two secured parties and neither has perfected?

Which of the following is an amendment to a financing statement that states that the debtor has no obligation to the secured party?

Transfer of collateral to a secured party is called a[n] ____.

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest. -Which of the following is true regarding any compensation that Molly is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

"Dry Cleaning." Molly wanted to start her own dry cleaning business. She borrowed $50,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Molly purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Molly was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Molly stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Molly's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Molly, and still had not done so 45 days after Molly had paid off the loan and requested that the bank terminate its interest. -Which of the following is the proper designation for any equipment subject to the bank's security interest that Molly obtains after the initial loan agreement?

When perfection by possession occurs, the parties must have a written security agreement.

What rights, if any, does a creditor who does not wish to repossess collateral have in the event of a default and why might a creditor prefer a remedy other than repossession of collateral?