Chapter 7

Question 1

What does Article 3 govern?

Answer 1

Commercial paper. A type of negotiable instrument

Question 2

What does Article 7 govern?

Answer 2

Documents of title like bills of lading and warehouse receipts

Question 3

Give me examples of documents that are not within Article 3 and that are

Answer 3

Warehouse receipts, bills of lading, stocks and bonds are not.

Any type of note or draft (like check and installment note) are

Question 4

What is a Draft?

Answer 4

An order for a third party to pay

Question 5

What is a trade acceptance?

Answer 5

A draft drawn by the payee on the drawee and accepted by the drawee

Question 6

What type of instrument is involved? A maker promises to pay a payee.

Answer 6

Note

Question 7

What type of instrument is involved? A drawer orders a drawee to pay a payee

Answer 7

Draft

Question 8

The UCC doesnt apply to,,,,

Answer 8

Cash/money

Question 9

To be a negotiable instrument within Article 3, the instrument must:

Answer 9

WSUFDDO
Woo Stop U Finna Dont Do Oll that

Writing
Signed
Unconditional promise
Fixed amount of money only
Demand
Definite
Order or 2 bearer (except checks)

Question 10

When a payment states it is conditional, what does that mean?

Answer 10

Its not negotiable

Question 11

What does it mean when an instrument states “subject to or governed by another agreement”

Answer 11

Not negotiable

Question 12

Who is a note and draft signed by?

Answer 12

Note-Maker

Draft-drawer

Question 13

What happens if it says “I will pay if the bears win the super bowl” and whats it called?

Answer 13

Not negotiable and its called No express conditions

Question 14

for it to be negotiable, how must it be paid?

Answer 14

Cash only and has to be ascertainable amount (specific amount that can be easily calculated)

Question 15

what if its payable upon somebodys death? Its.. unlesss….

Answer 15

not negotiable unless it had a latest possible date of payment can be determined on the front of the instrument

Question 16

What do checks not need? and when?

Answer 16

a date and pay to the “order” of magic words when drawee is a bank and payable on demand

Question 17

What are the magic words that need to be in front of an instrument?

Answer 17

made payable to “order” or “bearer”

Question 18

What happens if the instrument is not negotiable? and what does it mean?

Answer 18

There can be no holder in due course.

Question 19

What are the three qualities of Endorsements?

Answer 19

1. special or blank
2. restrictive or unrestrictive
3. qualified or unqualified

Question 20

Whats break in the chain of title?

Answer 20

when someone didnt sign that was supposed to and messed it all up, so he cannot qualify as a holder of the check

Question 21

What happens if someone forges a signature?

Answer 21

The break in chain didnt happen. but the innocent maker or drawer has real defense

Question 22

Explain what the three qualities of endorsements are:

Answer 22

1. special - endorses the instrument to someone else
   blank - doesnt endorse to anyone
2. restrictive - “only” to someone of “for deposit” or “for collection”
   unrestrictive -
3. qualified- “without recorse”
   unqualified-

Question 23

Whats a Holder in Due Course and what does it need to be one?

Answer 23

It limits the defenses that can be raised against an HDC .

It needs ALL of the following:
takes the paper...
1. for value
2. in good faith
3. without notice of any defenses to or claims of ownership
4. Negotiable (Front only)

Question 24

What is the shelter doctrine?

Answer 24

Non-HDC gets instrument from an HDC

Question 25

When the maker/drawer has a Real Defense, what does that mean?

Answer 25

Maker/drawer does not have to pay anyone

Question 26

What are the Real defences?

Answer 26

``` FFAAIIDDSS Fraud in the execution Forgery Adjuducated insanity Alteration Infancy Illegality Duress Discharge in bankruptcy Suretyship defenses Statue of limitations ```

Question 27

What is the overview of statutory scheme?

Answer 27

1. secured transactions - debt secured by collateral 2. security interest - right of creditor to repossess upon default 3. effective between creditor and debtor upon attachment (step 1) 4. effective against third parties upon perfection (step 2)

Question 28

What is a Purchase Money Security Interests? And when does it arrise?

Answer 28

it has priority over all other types of security interests in the same collateral if the PMSI is properly perfected. It arises when: 1. a creditor sells the collateral to the debtor on credit, retaining a security interest for the purchase price 2. the creditor advances funds used by the debtor to purchase the collateral

Question 29

Determine whether these goods are consumer goods, inventory or equipment? 1. debtor uses a car as a delivery vehicle for his business 2. he uses a car for household purposes 3. he buys a car to sell at his auto dealership

Answer 29

1. equipment 2. consumer 3. inventory

Question 30

When you lend someone something, what must the creditor attach?

Answer 30

They must attach an 1. authenticated record signed by debtor OR creditors taking possession. 2. have value 3. debtor must have rights in the collateral

Question 31

To acquire the max priority in the collateral over most such third parties should.... and what are the methods

Answer 31

Perfect. (perfect cat = Fair Price CAT) Fair Price CAT 1. filing - debtor must authorize filing and its effective for 5 years & can be renewed 2. taking possession of the collateral 3. control 4. automatic perfection - has to be PMSI Consumer goods 5. temporary perfection - 20 day period for proceeds. movement of debtor: 4 month grace period

Question 32

What are the priorities when creditors are fighting for something? (5)

Answer 32

1. buyer in the ord course of business 2. perfected PMSI 3. perfected non-PMSI 4. unperfected (only attached) 5. the debtor

Question 33

When do we have to do a PMSI file? Grace period?

Answer 33

has PMSI in inventory and equipment. Equipment has a 20 day grace period. (the earlier the better, the earlier date they filed we use)

Question 34

In consumer goods cases where the debtor has paid at least a certain percentage of the loan, the secured party must sell the collateral within a certain amount of days after repossessions. What's the percentage and days?

Answer 34

- 60% | - 90 days

Question 35

If a debtor is in default under a payment obligation secured by goods, the secured party has the right to:

Answer 35

- peacefully repossess the goods without judicial process - reduce the claim to a judgement - sell the goods and apply the proceeds toward the debt

Question 36

What are the six types of bankruptcy cases?

Answer 36

7 - liquidation - I,P, C - trustee req - no RIBS 9- municipal debt adj - I only (have 2 pay debts over 3-5yrs) - trustee req 11 - reorganization - I, P, C - not going 2 dissolve - no RIBS 12- farmers 13- adj of debts of individuals with regular income - voluntary only 15 - ancillary and other cross border cases

Question 37

To determine if the debtor has sufficient income to pay some or all of their debts under a ch 13 plan, the following calculation is made:

Answer 37

step 1 - avg income of 6 months prior filing if its equal to or less than state median income ch7 permitted. if the income exceeds state median income - means test applied Step 2 - means test = (avg monthly income - allowed exp) x 60 if less than 7,575 - ch 7 is permitted. if 12,475 or more - its abuse so no ch 7. If you are in between then abuse only if amount equals 25% of nonpriority claims

Question 38

When a petition is involuntary, min .... must be owed

Answer 38

owed at least 15,325. If fewer than 12 creditors - one or more owed 15,325 and 12 or more creditors - 3 owed 15,325 must petition

Question 39

Certain debts are discharged under chapter 7, these will not be discharged:

Answer 39

WAFTED Willful and malicious injury Alimony, maintenace, support, settlements from Marital separation Fraud Taxes due within 3 years Embezzlement - Educational loans Debts undisclosed in the bankruptcy petition

Question 40

the distribution of the debtors estate is in this order:

Answer 40

1. secured claimants 2. Priority claimants 3. General creditors who filed their claims on time

Question 41

What are the priority claimants?

Answer 41

SAG WEG CTI Support obligations to spouse and children Admin expenses Gap claims from involuntary cases Wage claims up to 12,475 Employee benefit plans up to 12,475 Grain farmers and fisherman up to 6,150 Cconsumer deposits up to 2,775 Tax Claims Injury claims arising from intoxicated driving