REG 4 - R7 Commercial Paper and Bankruptcy Flashcards Preview

CPA Exam > REG 4 - R7 Commercial Paper and Bankruptcy > Flashcards

Flashcards in REG 4 - R7 Commercial Paper and Bankruptcy Deck (20):
1

Commercial Paper

Includes drafts and notes (installments)
Excludes:
-Documents of title (bill of lading and warehouse receipts (both governed by Article 7))
-Investment securities (corporate bonds, covered by Article 8)

2

Special Endorsement

Specifies the person to whom it is payable

3

Restrictive Endorsement

"For Collection"

4

Qualified Endorsement

"Without Recourse"

5

Type of HDC Defenses

HDC is subject to REAL defenses but not personal defenses

6

Instrument paid at a definite time

Only if the latest date of which payment can be made can be determined from the face of the instrument

7

Who has secondary liability?

A drawer of a draft
Only liable after:
-The draft is presented to the draftee
-The draft is dishonored, and
-The drawer is given notice of the dishonor.

8

Minority of the Maker (aka Infancy)

Fraud in beginning stages

9

Drawer (regarding a check)

The check writer

10

Drawee (regarding a check)

The bank whose routing number is on the bottom left of the check (drafts are presented to drawees for payment)

11

Holder

Someone in legal possession of the check

12

Maker

Someone who makes the promissory note.
The note is present to the maker for payment

13

Fraud in the Inducement

When one is promised value in exchange for an instrument and the promisor does not intend to and does not give that value. (NOT a valid defense against HDC)

14

10 Defenses against a Holder in Due Course

1. Fraud in the execution
2. Forgery
3. Adjudicated insanity
4. Material alteration
5. Infancy
6. Illegality
7. Duress
8. Discharge in bankruptcy
9. Suretyship defenses
10. Statute of limitations

15

Purchase Money Security Interest (PMSI)

A seller who sales goods on credit and retains a security interest in the goods to secure the purchase price has a PMSI.
-A PMSI in consumer goods is already perfected, no need to file

16

Bankruptcy Discharge

Discharges most debts of a debtor, whether or not there is bankruptcy estate from which to pay the debts.

17

Ch. 9 (bankruptcy code)

MUNICIPAL DEBT

18

Ch. 7 (bankruptcy code)

LIQUIDATION- Trustee required
-trustee collects debtor's assets, liquidates them, and uses the proceeds to pay off creditors

-individual/married = discharged
-corp = dissolved

19

Ch. 11 (bankruptcy code)

DEBT REORGANIZATION- NO Liquidation, Trustee NOT required
-Debtor has possession and plan reorganization

20

Ch. 13 (bankruptcy code)

ADJUSTMENT OF DEBTS of individuals with regular income - Trustee required
-Debtor repays all or a portion of his debts over 3-5yrs max