Negotiable Instruments, Credit, and Bankruptcy Chapter 9
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55 Terms
What is a negotiable instrument?
A written document that promises or orders payment of money.
What law governs negotiable instruments?
UCC Article 3.
What are the functions of negotiable instruments?
Substitute for cash, credit tool, record-keeping device.
What are the 4 types of negotiable instruments?
Drafts, checks, notes, certificates of deposit.
What is a draft?
An order to pay money (e.g., personal check).
What is a note?
A promise to repay a loan.
What is a certificate of deposit (CD)?
A bank’s promise to repay a depositor with interest.
Who is the maker of a note?
The borrower.
Who is the payee of a note?
The lender.
Who is the maker of a CD?
The bank.
What are the UCC 3-104 requirements?
Writing, signature, unconditional promise/order, fixed amount, money only, definite time or demand, payable to order or bearer.
What is a defense to a negotiable instrument?
A legal reason a person does not have to pay.
What is minority as a defense?
Being under legal age.
What is fraud in the inception?
Being tricked about the nature of the contract itself.
What is a debtor?
The borrower.
What is a creditor?
The lender.
What is unsecured credit?
Credit without collateral.
What is secured credit?
Credit backed by collateral.
What is collateral?
Property used to secure a loan.
What is a mortgage or deed of trust?
A legal document securing a loan with property.
What is a recording statute?
Requirement to file mortgages publicly to give notice of liens.
What is foreclosure?
Court process to sell property to repay debt.
What is a deficiency judgment?
Court order to collect remaining debt after foreclosure.
What is a lien?
Legal claim against property for unpaid debt.
What is bankruptcy?
Federal process that allows debtors to eliminate or reorganize debt.
What is Chapter 7 bankruptcy?
Liquidation of assets to pay debts.
What is Chapter 11 bankruptcy?
Business reorganization under court supervision.
What is Chapter 13 bankruptcy?
Court-approved repayment plan for individuals.