cbad test 4 questions with verified
solutions
debtor-creditor relationship - correct answer ✔✔where the creditor has an interest in some property of
the debtor to secure payment of the debt, are governed by the provisions of UCC article 9, unless the
property is real estate
unsecured loan - correct answer ✔✔a customer goes to the bank to borrow $5,000 for 6 months. he is a
good customer with good credit. the bank loans the $5,000 in exchange for a promissory note. no
collateral or security is required.
an article 9 secured transaction - correct answer ✔✔customer applies for a $30,000 loan to buy a new
truck. bank loans $30,000. customer signs a promissory note and a security agreement giving the bank
an interest in the new truck. if customer defaults, bank takes the truck, sells it, and pays off the loan.
unsecured loan to buy a house - correct answer ✔✔governed by state contract law
secured loan to buy a house - correct answer ✔✔governed by UCC article 9
real estate loan to buy a house - correct answer ✔✔governed by the real estate finance law of the state
where the land is located
the creditor: DIRECT LENDER - correct answer ✔✔banks, finance companies, individuals, loan money to
the debtor and require collateral to insure repayment
the creditor: SELLER ON CREDIT - correct answer ✔✔a seller sells goods to a buyer and finances part, or
all of the purchase price and requires collateral, almost always the goods just sold
secured party - correct answer ✔✔the creditor in secured transactions
, debtor - correct answer ✔✔the party who owes money to a creditor and has given the creditor an
interest in his property to secure the repayment of the debt
security interest - correct answer ✔✔the legal term for the rights that a secured creditor has in the
debtor's property
security agreement - correct answer ✔✔the document in which the debtor gives the secured party an
interest in its property
collateral - correct answer ✔✔the specific property of the debtor used to secure the loan
security agreement: WRITING - correct answer ✔✔the security agreement must be in writing to be valid.
an electronic writing is sufficient and quite common. the only exception is the "pledge"
security agreement: SIGNATURE - correct answer ✔✔the debtor must sign the security agreement. an
electronic signature is called a authentication
security agreement: PROPERTY DESCRIPTION - correct answer ✔✔the exact property of the debtor
which is being used as collateral must be described in the agreement
property description: SPECIFIC DESCRIPTION - correct answer ✔✔if the collateral is a vehicle- make,
model, and vehicle identification number is sufficient
property description: GENERAL - correct answer ✔✔"All inventory of ABC auto parts located at 20 main
street, Conway, SC"
intent - correct answer ✔✔there must be language in the agreement clearly showing the debtor's intent
to grant a security interest to the creditor. the most common language is "debtor hereby grants to
creditor, a security interest in the following described property"
additional terms - correct answer ✔✔many security agreements will have numerous other terms and
conditions, but the above-stated are the only ones required by law. omission of one of those terms
renders the agreement invalid and results in the creditor having no interest in the collateral
solutions
debtor-creditor relationship - correct answer ✔✔where the creditor has an interest in some property of
the debtor to secure payment of the debt, are governed by the provisions of UCC article 9, unless the
property is real estate
unsecured loan - correct answer ✔✔a customer goes to the bank to borrow $5,000 for 6 months. he is a
good customer with good credit. the bank loans the $5,000 in exchange for a promissory note. no
collateral or security is required.
an article 9 secured transaction - correct answer ✔✔customer applies for a $30,000 loan to buy a new
truck. bank loans $30,000. customer signs a promissory note and a security agreement giving the bank
an interest in the new truck. if customer defaults, bank takes the truck, sells it, and pays off the loan.
unsecured loan to buy a house - correct answer ✔✔governed by state contract law
secured loan to buy a house - correct answer ✔✔governed by UCC article 9
real estate loan to buy a house - correct answer ✔✔governed by the real estate finance law of the state
where the land is located
the creditor: DIRECT LENDER - correct answer ✔✔banks, finance companies, individuals, loan money to
the debtor and require collateral to insure repayment
the creditor: SELLER ON CREDIT - correct answer ✔✔a seller sells goods to a buyer and finances part, or
all of the purchase price and requires collateral, almost always the goods just sold
secured party - correct answer ✔✔the creditor in secured transactions
, debtor - correct answer ✔✔the party who owes money to a creditor and has given the creditor an
interest in his property to secure the repayment of the debt
security interest - correct answer ✔✔the legal term for the rights that a secured creditor has in the
debtor's property
security agreement - correct answer ✔✔the document in which the debtor gives the secured party an
interest in its property
collateral - correct answer ✔✔the specific property of the debtor used to secure the loan
security agreement: WRITING - correct answer ✔✔the security agreement must be in writing to be valid.
an electronic writing is sufficient and quite common. the only exception is the "pledge"
security agreement: SIGNATURE - correct answer ✔✔the debtor must sign the security agreement. an
electronic signature is called a authentication
security agreement: PROPERTY DESCRIPTION - correct answer ✔✔the exact property of the debtor
which is being used as collateral must be described in the agreement
property description: SPECIFIC DESCRIPTION - correct answer ✔✔if the collateral is a vehicle- make,
model, and vehicle identification number is sufficient
property description: GENERAL - correct answer ✔✔"All inventory of ABC auto parts located at 20 main
street, Conway, SC"
intent - correct answer ✔✔there must be language in the agreement clearly showing the debtor's intent
to grant a security interest to the creditor. the most common language is "debtor hereby grants to
creditor, a security interest in the following described property"
additional terms - correct answer ✔✔many security agreements will have numerous other terms and
conditions, but the above-stated are the only ones required by law. omission of one of those terms
renders the agreement invalid and results in the creditor having no interest in the collateral
