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Business Law II > Unit 4 > Flashcards

Unit 4 Flashcards

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1
Q

A liquidation proceeding, traditionally called _______ , is brought under chapter ____ of the bankruptcy code

A

Straight bankruptcy, chapter 7; 826

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2
Q

If the bankrupt person has been honest in her business transactions and in the bankruptcy proceedings, she is usually given a _______ (relieved) of her debts.

A

discharge 826

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3
Q

Chapter ____ of the bankruptcy code, called ______, provides a preceding whereby a debtor can work out a plan to solve its financial problems under the supervision of a federal court. Contract between debtor and creditor that relieves some of the pressure off of the debtor.

A

Chapter 11, reorganizations 827

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4
Q

_____ of the bankruptcy code, provides a special procedure whereby a debtor involved in a family farming operation or a family owned commercial fishing operation can develop a plan to work out his financial difficulties.

A

Chapter 12; 827

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5
Q

Under _______ of the bankruptcy code, individuals with a regular incomes who are in financial difficulty can develop plans under court supervision to satisfy their creditors. It permits reduction of debts or extension in payment time.

A

Chapter 13; 827

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6
Q

Municipal, railroad, insurance, and banking corporations and savings or building and loan associations are not permitted to file a voluntary petition under ________ (Chapter ____).

A

straight bankruptcy, Chapter 7; 827

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7
Q

Under a _______ petition, a debtor files for Ch 7, where as a creditor may file an _____ petition to seek to have a debtor declare bankruptcy.

A

voluntary, involuntary 827

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8
Q

______ in straight bankruptcy cannot be filed against farmers; ranchers; nonprofit organization’s; municipal, railroad, insurance, and banking corporations; credit unions; and savings or building and loan associations.

A

involuntary petitions 827

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9
Q

If a debtor has _____ or more creditors, and involuntary petition to declare him bankrupt must be signed by at least ______ creditors.

A

twelve, three 827

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10
Q

Under the ______ revisions, individuals are _______ for relief under any chapter of the code unless within 180 days preceding their bankruptcy filing they received individual or group ________.

A

2005, ineligible, credit counseling/budget analysis 827.

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11
Q

Why is it difficult for a creditor to force an individual debtor into bankruptcy filing by and involuntary petition against the debtor?

A

because individuals who have not received the required credit counseling/budget analysis briefing are not eligible for relief under the bankruptcy code 828

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12
Q

The filing of a bankruptcy petition operates as an _______, holding in abeyance various forms of creditor action against the debtor or her property to include judicial proceedings and actions to take possession of a debtor’s property.

A

Automatic Stay 828

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13
Q

The creditor also elects a _____ who, if approved by the judge, takes over administration of the bankrupt’s estate and represents the creditor in handling the estate.

A

trustee 829

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14
Q

The ______ appraises the debtors property and sells non-exempt property.

A

trustee 829

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15
Q

Under the 2005 revisions specific to healthcare, trustees are first instructed to use reasonable best efforts to transfer patients ….

A

….in the healthcare business that is in the process of being closed to an appropriate healthcare business in the vicinity of the one being close that offers similar services and maintains a reasonable quality of care. 830

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16
Q

The 2005 revisions specify that the _____ or local law governing the debtors exemptions is the law of the place where the debtor was domiciled for ______ before filing. If the debtor did not maintain a domicile in a single state for that, then the law covering the exemption is the law of the place of the debtors domicile for the majority of the _______ period preceding (before) the filing of the petition that is between two and 2 1/2 years before the filing.

A

state, 730 days, 180 day; 830

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17
Q

The debtor must elect to use _____ of state law or ____ of federal law exemptions.

A

all 830

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18
Q

A _____ protects debtors assets that are contained within their homes.

A

homestead exemption 832

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19
Q

Roberts owes money to several creditors. Roberts pays $700 to one creditor and then files for bankruptcy. The payment Roberts made was a ______ payment. The _____ has the right to get ______ back from Roberts.

A

Preferential, Trustee, $700; 833

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20
Q

A trustee ______ recover preferential payments of debts to a spouse, former spouse, or child of a dinner for alimony, maintenance, or support pursuant to a separation agreement, divorce decree, or other court order.

A

may NOT 834

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21
Q

Only _______ creditors are required to file proofs of claims. However, a ______ creditor who is secured claims exceeds the value of the collateral is in ______ creditor to the extent of the deficiency.

A

unsecured, secured, unsecured 837

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22
Q

Order in which claims are paid (3)

A
  1. Secured creditors
  2. 10 priority classes in order of their listing on page 838
  3. General Creditors (mostly Unsecured creditors)
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23
Q

_______ creditors frequently received little or nothing on their claims.

A

Unsecured 838

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24
Q

A bankrupt person who has not been guilty of certain dishonest acts has fulfilled his duties as a bankrupt is entitled to a _______ in bankruptcy.

A

Discharge 838

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25
Q

A _____ or a ______ is not eligible for a discharge in bankruptcy

A

Corporation, partnership 838

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26
Q

An individual may not be granted a discharge if she obtained one within the previous ______

A

8 years 838

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27
Q

Chapter 11 Reorganizations are most common for ______ because they benefit the creditor more to continue the bankruptcy and establish a plan of payment than liquidation.

A

businesses 846

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28
Q

A _______ must be confirmed by the court in a Chapter 11 before assets such as shares in the company, or money can be distributed to the creditors

A

Reorganization plan 847

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29
Q

We organization plans can be confirmed either through the voluntary agreement of creditors or alternatively through what is known as a ____ whereby the court forces dissenting creditors whose claims would be impaired by a proposed planned to except the plan when the court can find that it is fair and equitable to the class of creditors whose claims are impaired.

A

cram down 847

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30
Q

Critics point out that many of the chapter 11 cases are permitted to drag on for years, thus depleting the assets of the _______ through payments to ______ and _______ involved in administration and diminishing the assets available to the _______

A

debtor, trustees, lawyer, creditors 850

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31
Q

Chapter ____ Proceedings are initiated only by the __________ of a debtor filed in the bankruptcy court.

A

Chapter 13, Voluntary petition 852

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32
Q

Under chapter 12 bankruptcy a debtor generally remains in possession of their farm land or fishing vessel and has the opportunity to work out of their financial difficulty over a period of usually ______.

A

three years 851

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33
Q

Under Chapter 7, in order for a creditor(s) to be able to file an involuntary petition, the creditor(s) claims must exceed any securities they hold by _______.

A

$14,425 or more; 827

34
Q

Under Chapter 7, a debtor who receives property or requested estates from deceased loved ones within ______ of the Bankruptcy filing, will still be subject to creditor claims.

A

180 days; 830

35
Q

A ____ is a person who is liable for the payment of another person’s debt or for the performance of another person’s duty.

A

surety 780

36
Q

When a person signs a contract with a car sales man to make payments on a car, this is an example of a ________ .

A

promissory note 781

37
Q

another word for surety is ______

A

cosigner 781

38
Q

a ______ makes a separate promise and agrees to be liable upon the happening of a certain event such as the primary debtor going default.

A

Guarantor 781

39
Q

While a surety is ______ liable, a guarantor is ______ liable

A

primarily, secondarily 781

40
Q

a surety _____ use any defense against the creditor that the principal uses with the exception of _______ and _____.

A

MAY, lack of capacity (minority, insanity, intoxication), bankruptcy 783

41
Q

An ______ surety is a person who acts as a surety without compensation, such as a friend who cosigns a note as a favor.

A

accommodation 784

42
Q

A ______ surety is a person, usually professional such as a binding company, who is paid for serving as a surety.

A

Compensated 784

43
Q

the courts generally offer more protection of which type of surety?

A

accommodation sureties 784

44
Q

If the surety has to perform or pay the principles obligation, then the surety acquires all of the rights that the creditor had against the principal under the concept of the _____________

A

right of subrogation 784

45
Q

If the surety performs or pays the principles obligation, she is entitled to a recover her costs from the principle; this is known as the surety’s ______________ .

A

Right to reimbursement 784

46
Q

Under the cosurety’s _____________ when Tom, Dick, and Harry are all cosigners on Sam’s loan and Tom pays the default loan, Tom has the right to collect one third from Dick and Harry.

A

Right to contribution 784

47
Q

A surety has a _________, which is the right of the surety or guarantor to require the debtor to make good on his commitment to the creditor when he __________ and ________.

A

Right of exoneration, is able to do so, does not have a valid defense against payment 784

48
Q

a ______ is a security interest in real property or a deed to real property that is given by the owner (______) as a security for debt owed to the creditor (________).

A

mortgage, mortgager, mortgagee 787

49
Q

_______ is the process by which any rights of the mortgagor or or the current property owner are cut off.

A

Foreclosure 788

50
Q

___________ is where the creditor keeps the property in satisfaction of the debt, and the owners rights are cut off. The debtor has no right to _____ and the creditor has no right to _______.

A

Strict foreclosure, surplus, deficiency 788

51
Q

in a foreclosure _________, suit is brought in a court having jurisdiction and surplus is paid to the defendant while deficiencies are generally paid to the creditor.

A

By action and sale 788

52
Q

Under a mortgage by the _______, the mortgagee sells the land and any surplus is paid to the mortgagor (debtor).

A

power of sale 789

53
Q

The right to foreclose under a _________ must be expressly conferred on the terms of the mortgage.

A

power of sale 789

54
Q

The deed of trust (similar to a mortgage) has three parties…list them:

A

1: the owner of the property who borrow the money (debtor)
2: the trustee who holds legal title to the property put up as a security, and
3: the lender who is the beneficiary of the trust 791

55
Q

The purpose of the deed of trust is to make it easy for the security to be _______ by the ______. However, most states offer the owner long redemption periods (time to pay off the default) thus the logic is flawed.

A

liquidated, trustee 791

56
Q

The _______ is a device for securing the balance due to the seller on the purchase price of real estate. The seller keeps the legal title until ……….

A

land contract, the purchase price is paid 791

57
Q

An interest in real estate should be in writing and recorded in the local _________.

A

land records 791

58
Q

A _____ is someone who is contracted to furnish certain materials to perform a designated general contract. They are not entitled to this lien unless the _______ expressly provides that __________ are entitles to a lien.

A

materialman, state statute, submaterialmen 793.

59
Q

A _________ automatically attaches without filing, when the fist work is done to make improvements on the property.

A

mechanic’s lien 793

60
Q

It is common practice that before a person who is having improvements made to his property makes final payment, he requires the _______ to sign an affidavit that all ______ and subcontractors have been ________ and to supply him with a _______ signed by the ________ and subcontractors.

A

contractor, materialmen, paid, release of lien, materialmen 794

61
Q

When purchasing a property _________ a purchaser is not liable, whereas if the purchaser __________ they are personally liable for the mortgage.

A

subject to mortgage, assumes a mortgage 788

62
Q

The law covering security interest in personal property is set forth in ____________

A

Article 9 of the UCC 800

63
Q

Obtaining an enforceable security interest is a two-step process: ______ and ______

A

Attachment, perfection 801

64
Q

3 things required to make an attachment legal:

A
  1. a written agreement by the debtor granting the creditor security interest or the secured party has possession of the of the particular property.
  2. creditor must give something of value to the debtor.
  3. debtor must have rights in the collateral or permission from the owner to use the property as collateral. 801
65
Q

property that the debtor does not currently own or have rights in but he may acquire in the future is called ___________.

A

after-acquired property 803

66
Q

When the seller of goods retains a security interest in goods until they are paid for, or when money is loaned for the purpose of acquiring certain goods and the lender takes a security interest in those goods, the security interest that is created and attached to the goods is known as a _________ .

A

Purchase money security interest (PMSI) 802

67
Q

A security agreement may stipulate that it covers advances of credit to be made at sometime in the future. Such later extensions of credit are known as _______.

A

future advances 803

68
Q

Under the code, there are three main ways of perfecting a security interest:

A
  1. filing a public notice of the security interest
  2. creditor taking possession or control of the collateral
  3. in certain transactions, by mere attachment of the security interest; this is known as automatic perfection. 804
69
Q

The most common way to perfecting a security interest is to file a _______ in the appropriate public office.

A

Financing statement 804

70
Q

In all states, a financing statement that covers fixtures must be filed in the office where a ______ or ______ would be filed.

A

Mortgage, real estate 807

71
Q

In regard to collateral other than fixtures, most states require only central filing, usually in the __________.

A

Office of the Secretary of State 807

72
Q

A financing statement is effective for a period of ________ from the date of filing, and it lapses then unless a continuation statement has been filed before that time. ______ are the exception as they are effective until the _______ is released or terminates.

A

5 years, mortgages, mortgage 807

73
Q

Simpson borrows $150 from a pawnbroker and leaves his guitar as collateral for the loan. The pawnbroker’s security interest in the guitar is _________ by virtue of her possession of the guitar.

A

Perfected. 807

74
Q

Perfection by ______ occurs when a creditor who sells goods to a consumer on credit, or who lends money to enable a consumer to buy goods, can obtain Limited perfection of a security interest by merely ______________ to the goods.

A

attachment, attaching the security interest 808

75
Q

Under the ___________ rule, Perfection of a security interest first gives a creditor ______ over other creditors.

A

General priority, priority 810

76
Q

____________ have priority over other conflicting security interests in the same collateral if it is perfected at the same time the debtor receives the collateral within _______.

A

Purchase money security interests, 20 days afterwards 812

77
Q

another exception to the general priority rule occurs when a ____________ takes free from security interest created by his seller even though the buyer knows of its existence.

A

Buyer in the ordinary course of business 813

example: persons buying a a vehicle from a dealership even though that vehicle has a perfected security interest by a bank.

78
Q

Under an ______ or ______ lien, when a person brings a car to mechanic to get fixed and then defaults on their loan, the ______ is entitled to their share of the proceeds first.

A

Artisans, mechanic’s, mechanic 813

Artisan examples: furniture that is taken to be upholstered.

79
Q

An appliance store sells a television sent to Arthur for $750 on a conditional sales contract, thus reserving a security interest under ___________

A

perfection by attachment 816

80
Q

Distribution of proceeds after the sale of collateral by the creditor (4)

A
  1. any expenses incurred to repossess the collateral, store it, sell it, and reasonable attorney fees.
  2. creditor
  3. any junior interests or liens
  4. any proceeds remaining go to the debtor 818

Business Law II (7 decks)

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