Exam (elaborations)
LEGL 4400 Exam 2a questions and answers certified 2024
- Course
- Institution
LEGL 4400 Exam 2a questions and answers certified 2024
[Show more]
Content preview
LEGL 4400 Exam 2Promissory note - correct answer ✔a contract between the debtor and
creditor outlining the terms of the loan
Default - correct answer ✔breach obligation of the promissory note
-Sue me based on the promissory note
Why has someone put up some collateral to "secure" the loan? - correct
answer ✔-So if I default, you can take the item(s) and sell it to make back
some of the money
-Can still sue me for the difference based on the note
What effect would collateral have on interest rate? - correct answer
✔Decreases it
Still need the promissory note, but now we need something in addition... -
correct answer ✔I need to give you a security interest in the collateral
How do I give you that security interest or better said, "how do I attach the
security interest to the collateral?" - correct answer ✔Attachment
Attachment elements - correct answer ✔-Creditor gives value
-Debtor has rights in collateral
-Security agreement (generally requires signature of D)
Security Agreement - What's required? - correct answer ✔-ID parties
,-Describe the collateral with some level of precision (can also include "after
acquired property")
-Terms of the security interest
-Authenticated by debtor (not necessarily signature, but usually)
Attachment is only effective against the debtor (D) but not third parties
(OTS)...we need "perfection" - together think of "DOTS" - correct answer
✔Debtor
Other creditors
Trustee in bankruptcy
Subsequent purchasers
Perfection = Attachment plus (one of the following) - correct answer ✔-Filing
of financing statement
-Possession of collateral by the secured party (pawn shop example)
-Automatic perfection based on attachment (PMSI in consumer goods)
-Secured party taking control of the collateral (intangibles)
-Temporary perfection allowed under the Code (grace period for PMSI in
consumer goods)
Why secured transactions? - correct answer ✔Access to capital
Risk is a big issue
Collateral reduces lending risk
How are secured transactions formed? - correct answer ✔-Promissory note
for the loan (with or without collateral)
-"Attachment" creates security interest (with collateral); between D & C
-Creditor gives value
, -Debtor has rights in collateral
-Security agreement (generally requires signature of D)
After "Attachment" we need something else:
-Perfection to deal with the "OTS" in DOTS
How do "secured transactions" differ from "unsecured transactions? - correct
answer ✔Collateral vs no collateral.
-In a secured transaction, there is collateral involved. Collateral is an asset or
property that the borrower (debtor) pledges to the lender (creditor) to secure
the repayment of a loan or fulfillment of an obligation. If the debtor fails to
repay the debt, the lender can take possession of the collateral to recover
their losses.
-Unsecured transactions, on the other hand, do not involve collateral. In these
transactions, there is no specific asset pledged to secure the debt or
obligation. Lenders rely on the borrower's creditworthiness and promise to
repay the debt.
Secured transaction examples - correct answer ✔Secured transactions
commonly include loans secured by real estate (mortgages), automobiles
(auto loans), business assets, inventory, or equipment (secured business
loans), and other valuable property
Unsecured transaction examples - correct answer ✔Credit cards, personal
loans, student loans (in some cases), and many types of business loans are
examples of unsecured transactions. These types of loans are typically riskier
for lenders, as they have no specific collateral to fall back on if the borrower
defaults
Why do secured transactions exist? - correct answer ✔Risk Management:
Lenders use secured transactions to minimize their risk. By taking a security
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller LEWISSHAWN55. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $13.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79835 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now