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Exam 20: Secured Transactions

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Question 1

Multiple Choice

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Angie borrows $20,000 from Credit Line Company using a stand of timber as collateral. To perfect its security interest, Credit Line must file its financing statement with​

A) ​the county clerk.
B) ​the mayor.
C) ​the state lumbermen's association.
D) ​the secretary of state.

E) All of the above
F) A) and B)

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Question 2

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On default, a secured party who chooses not to retain the collateral must dispose of it in a commercially reasonable manner.

A) True
B) False

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Question 3

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Rural Financial Corporation is a secured party with a security interest in property owned by Strawberry Fields, Inc. Perfection of this security interest may not protect Rural Financial against the claim of​

Capital Projects, Inc., files a financing statement to provide notice of its security interest in the property of Data Network Corporation. The initial effective term of a financing statement is a period of​

Gina borrows from Regional Loan Company the funds to buy a car. The car secures the debt. Gina defaults on the loan. Regional takes possession of the car, planning to sell it to recover some of the unpaid debt. Before the creditor sells the car or enters into a contract for its sale, Gina can pay what she owes and take back the car. This is​

A financing statement cannot be the same as the security agreement.

The concept of a floating lien applies to a constantly changing inventory.

A security agreement does not need to contain a description of the collateral.

EZ Loans, Inc., issues a line of credit in Glade Electronics Corporation under a security agreement. Later, Glade buys new HD-TVs to add to its inventory. EZ has a security interest in the new inventory​

Where and how to perfect a security interest sometimes depends on the classification of the collateral.

Ken's Auto Sales borrows money from Lenders Finance Corporation under a security agreement. With the money, Ken's buys six Mazda Miatas. The vehicles are​

Attachment gives the creditor an enforceable security interest in the collateral.

The payment of Janitorial Service's debt to Business Finance, Inc., is guaranteed by the service's personal property. Business Finance is​

A secured party is any creditor who has a security interest in a debtor's collateral.

Sara needs $1,500 to buy textbooks and other school supplies. Tomas agrees to loan Sara $1,500, accepting as collateral Sara's car. They put their agreement in writing and sign it. Sara keeps possession of the car. Does Tomas have an enforceable security interest? How can Tomas let other creditors know of his interest in the car?

The payment of Chick's debt to Diamond is guaranteed by Chick's collection of eight restored autos. Their agreement describes Chick's subject property by serial number. To establish Diamond's interest, this is​

Dave's Hardware store defaults on a debt to Equity Bank, which takes possession of the collateral securing the debt. The bank sells the collateral. The proceeds from the sale are applied first to​

Brass & Woodwind Instruments, Inc., allows Clifton to keep a professional clarinet that he bought from Brass & Woodwind even though he has not paid the full price. Brass & Woodwind's legally sufficient financing statement in the goods need not include​

In most situations, the state office in which a financing statement should be filed depends on the location of the collateral.

A security interest cannot be perfected without the filing of a financing statement.