Chapter 21 Vocabulary

Question 1

Any transaction in which the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest.

Answer 1

Secured Transaction

Question 2

A creditor who has a security interest in the debtor’s collateral, including a seller, lender, cosigner, or buyer of accounts or chattel paper.

Answer 2

Secured Party

Question 3

Under Article 9 of the UCC, any party who owes payment or performance or a secured obligation.

Answer 3

Debtor

Question 4

Any interest in personal property or fixtures that secures payment or performance of an obligation.

Answer 4

Security Interest

Question 5

An agreement that creates or provides for a security interest between the debtor and a secured party.

Answer 5

Security Agreement

Question 6

Under Article 9 of the UCC, the property subject to a security interest.

Answer 6

Collateral

Question 7

A document filed by a secured creditor with the appropriate official to give notice to the public of the creditor’s security interest in collateral belonging to the debtor named in the statement.

Answer 7

Financing Statement

Question 8

Failure to pay a debt when it is due.

Answer 8

Default

Question 9

In a secured transaction, the process by which a secured creditor’s interest “attaches” to the collateral and the creditor’s security interest becomes enforceable. In the context of judicial liens, a court-ordered seizure of property before a judgement is secured for a past-due debt.

Answer 9

Attachment

Question 10

The legal process by which secured parties protect themselves against the claims of third parties who may wish to have their debts satisfied out of the same collateral. It is usually accomplished by filing a financing statement with the appropriate government official.

Answer 10

Perfection

Question 11

A security device in which personal property is transferred into the possession of the creditor as security for the payment of a debt and retained by the creditor until the debt is paid.

Answer 11

Pledge

Question 12

A security interest that arises when a seller or lender extends credit for part or all of the purchase price of goods purchased by a buyer.

Answer 12

Purchase-Money Security Interest (PMSI)

Question 13

A statement that, if filed within six months prior to the expiration date of the original financing statement, continues the perfection of the security interest for another five years.

Answer 13

Continuation Statement

Question 14

Under Article 9 of the UCC, whatever is received when collateral is sold or disposed of in some other way.

Answer 14

Proceeds

Question 15

Property that is acquired by the debtor after the execution of a security agreement.

Answer 15

After-Acquired Property

Question 16

The use of an asset that is not the subject of a loan to collateralize that loan.

Answer 16

Cross-Collateralization

Question 17

A security interest in proceeds, after acquired property, or collateral subject to future advances by the secured party (or all three). The security interest is retained even when the collateral changes in character, classification, or location.

Answer 17

Floating Lien

Question 18

The implementation of a court’s decree or judgement.

Answer 18

Execution

Question 19

The legal process of obtaining funds through the seizure and sale of nonexempt property, usually done after a writ of execution has been issued.

Answer 19

Levy

Question 20

A judgement against a debtor for the amount of a debt remaining unpaid after the collateral has been repossessed and sold.

Answer 20

Deficiency Judgement

Question 21

A nonpossessory, filed lien on an owner’s real estate for labor, services, or materials furnished by making improvements on the reality.

Answer 21

Mechanic’s Lien

Question 22

A possessory lien held by a party who has made improvements an added value to the personal property of another party as security for payment for services performed.

Answer 22

Artisan’s Lien

Question 23

A court order to seizure a debtor’s nonexempt property prior to a court’s final determination of a creditor’s rights to the property.

Answer 23

Writ of Attachment

Question 24

A court order directing the sheriff to seizure (levy) and sell a debtor’s nonexempt real or personal property to satisfy a court’s judgement in the creditor’s favor.

Answer 24

Writ of Execution

Question 25

A legal process whereby a creditor collects a debt by seizing property of the debtor that is in the hands of a
third party.

Answer 25

Garnishment

Question 26

A contract between a debtor and his or her creditors in which the creditors agree to discharge the debts on the debtor’s payment of a sum less than the amount actually owed.

Answer 26

Creditor’s Composition Agreement

Question 27

A promise made by a third party to be responsible for a debtor’s obligation.

Answer 27

Suretyship

Question 28

A third party who promises to be responsible for a debtor’s obligation under a suretyship arrangement.

Answer 28

Surety

Question 29

A third party who promises to be responsible for a debtor’s obligation under a guaranty arrangement.

Answer 29

Guarantor

Question 30

The right of a party to stand in the place of another, giving the substituted party the same legal rights that the original party had.

Answer 30

Right of Subrogation

Question 31

The right of a party to be repaid for costs, expenses, or losses incurred on behalf of another.

Answer 31

Right of Reimbursement

Question 32

A joint surety; a party who assumes liability jointly with another surety for the payment of a debtor’s obligation under a suretyship arrangement.

Answer 32

Co-Surety

Question 33

The right of a co-surety who pays more than his or her proportionate share on a debtor’s default to recover the excess paid from other co-sureties.

Answer 33

Right of Contribution