Unit 1 Test

Front 1

Secured Transactions

Back 1

A transaction in which the payment of a debt is guaranteed or secured by collateral.

Front 2

Collateral

Back 2

Property, including accounts and chattel paper.

Front 3

Chattel Paper

Back 3

a note evidencing a debt secured by personal property which is subject to security interest.

Front 4

Security Interest

Back 4

an interest in personal property or fixtures.

Front 5

Fixtures

Back 5

improvements to real property- which secures payment or performance.

Front 6

Security Agreement

Back 6

A document that provides a lender a security interest in a specified asset or property that is pledged as collateral. In the event that the borrower defaults, the pledged collateral can be seized and sold

Front 7

Debtor

Back 7

One who owes a debt to a credit agency or any other type of secured party.

Front 8

Creditors 2 Main concerns

Back 8

Satisfaction of the debt through possession and sale of collateral, priority over other creditors who rights on the same collateral.

Front 9

Attachment

Back 9

required to make a security interest, required that the debtor has rights to collateral, secured party must give value in exchange for interest in collateral.

Front 10

Prioritization

Back 10

Why a person should perfect a security interest.

Front 11

Perfection

Back 11

the process by which secured parties protect their security interests in collateral against other 3rd party claims.

Front 12

Written Security Interest

Back 12

This is required if the collateral is not in the secured party's possession.

Front 13

Reasonably identified

Back 13

When describing collateral in a written security agreement it must be described in such a way that it can be reasonably identified and signed by the debtor.

Front 14

Financing Statement

Back 14

This is prepared by the secured creditor to give notice to third parties that the creditor claims an interest in the collateral. Filed with state or local office.

Front 15

Components required for Financing Statement

Back 15

Debtor's Name, Addresses of both the debtor and secured party, description of the collateral by item or type.

Front 16

Perfection by Possession

Back 16

a secured creditor can perfect his or her security interest by taking possession of the collateral until the debtor has paid the debt for which the collateral was pledged.

Front 17

Reasonable Care

Back 17

If the secured party possesses the collateral they must do everything to preserve the full value of the property, otherwise secured party will be liable for the cost of repair or loss.

Front 18

Purchase Money Security Interest (PMSI)

Back 18

Automatically perfected at the time of the credit sale, only exception is for autos, which are perfected with the title certificate.

Front 19

Proceeds

Back 19

A security agreement will cover money or other valuable assets received when collateral is sold or otherwise disposed off

Front 20

Line of Credit

Back 20

Covered by a security agreement. Often arranged with a bank which the debtor can borrow funds as needed.

Front 21

Floating Lien

Back 21

A security interest in collateral that is retained even when the collateral changes in character, classification, and/or location. (a lien based upon a business’ inventory, no matter what stage of the product’s production)

Front 22

After-Aquired Property

Back 22

Property that a person acquires after taking on a debt, which becomes additional collateral for the debt. (usually when specified that all property is collateral)

Front 23

Perfected Interest Prevails

Back 23

one secured party has a perfected security interest in collateral and another secured party has an unperfected security interest in the same collateral.

Front 24

First to Perfect Prevails

Back 24

When 2 or more secured parties have perfected security interests in the same collateral

Front 25

First to attach Prevails

Back 25

When 2 or more secured parties have unperfected security interests in the same collateral

Front 26

Assignment and Release

Back 26

A secured party may, at its discretion, assign part of all of a security interest to another party and/ or release part of all of the collateral covered by a security interest

Front 27

Status of the Debt

Back 27

A debtor may request that the secured creditor confirm the debt remaining and/ or the collateral covering the remainder of the debt.

Front 28

Termination

Back 28

When a secured debt is fully paid, the secured party generally must send a termination statement to the debtor and file a copy with the appropriate filing office.

Front 29

Default

Back 29

A debtor's failure to pay a debt when due and/or a secured party's failure to discharge a debt when paid.

Front 30

Execution

Back 30

A secured party can relinquish its secuirty interest and proceed to judgement on the underlying debt and carry out the effect of the court decree.

Front 31

Levy

Back 31

A secured party can relinquish its security interest and proceed to judgement on the underlying debt Seizure and sale of property, subject to a writ of execution, to satisfy a debt.

Front 32

Repossession

Back 32

A secured party can take possession of the collateral and retain or resell it.

Front 33

Disposition

Back 33

Must be sold in a commercially reasonable manner, and notify the debtor of the time and place of sale.

Front 34

Proceeds from Disposition

Back 34

must be applied as follows: reasonable expenses stemming from retaking, holding, or preparing for sale, satisfaction of the balance of debt, satisfaction of other secured creditors from whom written demand for proceeds has been received, any surplus paid to the debtor.

Front 35

Mechanic's Lien

Back 35

non-possessory lien on real property to ensure payment for work performed and materials furnished in the repair or improvement of real property.

Front 36

Artisan's Lien

Back 36

possessory lien on personal property to ensure payment for services performed to repair, improve, and/or enhance the value of the personal property. Have to be permanent modification, consumables are not subject to artisan lien.

Front 37

Innkeeper's Lien

Back 37

possessory lien on the luggage, and contents thereof, of a hotel’s guest for unpaid hotel charges.

Front 38

Judgment Lien

Back 38

lien obtained by judicial order in favor of a creditor.

Front 39

Writ of Attachment

Back 39

court order to seize and take custody of property of the debtor prior to the issuance of a judgment lien. (used in cases where the threat of the property being sold before the decision is high, the court are the ones who take the possession of the item.)

Front 40

Writ of Execution

Back 40

A court order, following the issuance of a judgment lien, to seize and sell property of the debtor. Often with police assistance

Front 41

Garnishment

Back 41

Legal process used by a creditor to collect a debt by seizing property from the debtor (usually wages) being held by a 3rd party(bank, employer, or bank savings account)

Front 42

Composition Agreement

Back 42

Between a debtor and creditors by which the creditors agree to accept a lesser su than that owed in full satisfaction of the debt.

Front 43

Foreclosure

Back 43

A mortgage holder(the mortgagee) has the right, subject to state law, to foreclose on mortgaged property in the event of a default

Front 44

Deficiency Judgement

Back 44

if the proceeds of the sale are not sufficient to satisfy the mortgage, the mortgagee may seek this to collect the balance due from the debtor.

Front 45

Suretyship

Back 45

an express promise by a 3rd party (surety) to a creditor primarily responsible for the debtor's obligation to the creditor

Front 46

Guaranty

Back 46

An express promise by a 3rd party (garantor) to a creditor to be secondarily responsible for the debtor's obligation in the incident that the debtor defaults.

Front 47

Statute of Frauds

Back 47

requires a guaranty to be in writing.

Front 48

Defenses of Sureties and Guarantors

Back 48

Sureties and guarantors are entitled to make the same defenses against making the payment which include fraudulent inducement, material modification, satisfaction of performance, and rejected tender of payment.

Front 49

Subrogation

Back 49

the right of the guarantor or surety to stand in the shoes or be substituted for another party.

Front 50

Reimbursement

Back 50

the right of a guarantor or surety to be restored, repaid, or indemnified for costs, expenses, or losses expended or incurred on behalf of the debtor.

Front 51

Contribution

Back 51

the right of a co-surety or co-guarantor (where 2 or more persons acting as surety or guarantor) to recover from the other co surety/ gaurantor the costs, expenses, or losses incurred on their behalf greater than their proportionate share.

Front 52

Homestead Exemption

Back 52

each state's law permitting a debtor to retain his or her family home, either in its entirety or up to a specific dollar amount, free from claims of unsecured creditors and trustees in bankruptcy.

Front 53

Chapter 7

Back 53

Liquidation of assets

Front 54

Chapter 12

Back 54

designed for "family farmers" or "family fishermen" with "regular annual income." It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts.

Front 55

Chapter 13

Back 55

also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

Front 56

Voluntary bankruptcy

Back 56

a debtor who finds themselves unable to pay debts as they become due may voluntarily pension for bankruptcy.

Front 57

Involuntary Bankruptcy

Back 57

a bankruptcy petition may be filed against a debtor by his or her creditors.

Front 58

Automatic Stay

Back 58

Once bankruptcy petition is filed voluntarily or involuntarily, all other litigation or other action by creditors or potential creditors against the debtor are suspended until the bankruptcy is resolved and the stay is lifted.