Practice Quiz

CLEP Business Law

Category - Legal Envrmt

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How does a creditor perfect his or her interest?
  1. By showing that he or she extended credit to the debtor prior to other creditors.
  2. By showing that the debtor agreed to perfect his or her interest.
  3. By contacting the bankruptcy court and letting it know that he or she is a priority creditor.
  4. By filing appropriate paperwork to record his or her security interest.
  5. All of the above.
Explanation
Answer: D. A creditor perfects his or her interest by filing appropriate paperwork to record his or her security interest. When a creditor perfects his interest, that creditor's interest will take priority over creditors who have not perfected their interests. A creditor with a perfected interest will get paid first by the debtor.
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