M5-Suretyship

Question 1

A noncompensated surety will be discharged from liability if the principal debtor and the creditor modify the terms of the contract in any way. (true or false)

Answer 1

True

A partial surrender of the debtor’s collateral is a modification that will release a noncompensated surety from liability.

Question 2

Federal law does not allow creditors to institute garnishment proceedings with respect to federal social security benefits. (true or false)

Answer 2

true

Also, Federal law nor state law, controls what property is subject to federal tax liens.

Question 3

A mechanic’s lien arises from what?

Answer 3

Improvements on real property.

This lien requires the lienholder to give notice of legal action before selling the debtor’s property to satisfy the debt.

Question 4

An artisan’s lien arises from what?

Answer 4

Improvements made to personal property.

This lien requires the lienholder to give notice of legal action before selling the debtor’s property to satisfy the debt.

Question 5

Tender of performance by the principal debtor completely releases the surety, even a compensated surety. (true or false)

Answer 5

true

Changing the manner of payment, and/or time of payment will release a compensated surety only if the change increases the surety’s risk.

Partially releasing the principal will only partially release the compensated surety.

Question 6

___________is the right a surety has by which the surety succeeds to the creditor’s rights against the principal when the surety pays the principal’s obligations.

Answer 6

Subrogation

Question 7

__________ is the right a surety has against the debtor to force the solvent debtor to pay a debt when the debtor refuses to do so.

Answer 7

Exoneration

Question 8

_________ is a right one surety has against the surety’s co-sureties to force them to pay their share of the debt.

Answer 8

Contribution

Question 9

Incompetency of the principal debtor does not discharge a cosigner of a loan. (true or false)

Answer 9

true

A surety may raise his or her own contract defenses to limit his or her liability; thus, the surety’s own incapacity is a defense to the surety promise.

Question 10

A surety generally is primarily liable on the debt the surety agrees to backstop and has no right to compel the creditor to collect from the principal debtor or to compel the creditor to proceed against the debtor’s collateral. (true or false)

Answer 10

true

Question 11

The Federal Debt Collection Practices Act (FDCPA) gives parties injured by unfair collection practices the right to sue for damages. (true or false)

Answer 11

true

The FDCPA prohibits contacting the debtor directly if an attorney represents the debtor.

Question 12

A composition of creditors is an agreement between a debtor and at least two creditors that the creditors will take less than full payment to discharge the debts owed by the debtor to the creditors who participate in the composition agreement. The agreement results in what?

Answer 12

A discharge of the debts in full because a contract is created by the cross-promises of the parties (i.e., the cross-promises serve as consideration, so the pre-existing duty is avoided)

Question 13

An assignment for the benefit of creditors is a transfer of some or all of a debtor’s property to a trustee who then uses the property to pay the creditors. There is no discharge of debts here because the creditors have not entered into any contract to take less than full payment (true or false)

Answer 13

true

Question 14

A writ of attachment is an order by the court to a sheriff to seize a person’s property. (true or false)

Answer 14

true

The writ can apply to personal property and to real property, and so the writ can be used even when a person owns no real property.

Question 15

Garnishment is an order to a third person who holds property of the debtor to turn the property over to a creditor. (true or false)

Answer 15

true

The property involved usually are wages and/or other property owed by the third person to the debtor. There is no requirement that the property be the debtor’s real property.

Question 16

Release of a co-surety is treated the same as release of security. The release discharges the other co-sureties to the extent of the impairment of their right. (true or false)

Answer 16

true

Question 17

Under the Uniform Fraudulent Conveyance Act these acts are indicia of fraudulent conveyance:

Answer 17

• Debtor remaining in possession after conveyance
• Secret conveyance
• Debtor retains an equitable benefit in the property conveyed

These are all attempts to conceal or transfer property to prevent a creditor from satisfying a judgment.

Question 18

A mechanic’s lien is placed on property such as an automobile and will prevent the owner from transferring “clean” title without paying the mechanic’s lien. A mechanic’s lien does not, by itself, allow the creditor to collect money from a debtor’s wages. (true or false)

Answer 18

true

Question 19

The statute of frauds requires promises to pay the debts of another to be evidenced by a writing containing the material terms. (true or false)

Answer 19

true

Question 20

Any variation on an uncompensated surety’s risk releases the surety. (true or false)

Answer 20

true

Question 21

When one of several co-sureties becomes bankrupt, the other co-sureties are liable on the debt to the extent each agreed and are liable in contribution to each other in proportion to the amount each agreed to pay. (true or false)

Answer 21

true