Chester Owns and Operates a Farm

question 64

Multiple Choice

Chester owns and operates a farm.As a result of financial difficulties in Chester's past, a bank currently holds a security interest in all of Chester's after-acquired property.Unfortunately, Chester's situation recently deteriorated even further when his thresher (a type of farm vehicle) developed irreparable defects.He cannot continue on with business unless he acquires a replacement.This appears to be a problem because he has no money for the purchase price.And while he could otherwise simply purchase the new machine on credit, the bank's security interest suggests that any new security interest necessarily would rank second.Which of the following statements is TRUE?

• A)Chester's best option is to declare bankruptcy.
• B)Chester's only hope of purchasing the new thresher is to persuade his bank to forgive part of his existing debts.
• C)Chester's best option is to secretly purchase the new thresher on credit, without disclosing that fact to the bank that holds the old security interest.
• D)A purchase money security interest is available to Chester only if his bank agrees to lend him more money and to take a new form of security over the new thresher.
• E)A thresher vendor is entitled to acquire a purchase money security interest and to enjoy priority over the bank's security interest without the bank's consent.

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Definitions:

Garbage Can

A metaphor in organizational studies describing decision-making in organized anarchies where decisions are made randomly.

Principle Of Belongness

An aspect of learning theory suggesting that items or ideas that are perceived as belonging together are more easily remembered.

Wing Flapping

The movement of an animal's wings up and down, typically seen in birds as part of flight or communication behaviors.

Defense Reaction

A psychological or physiological response to a perceived threat, aimed at safeguarding an individual.