XYZ Company, a Distributor of Auto Parts, Is in Debt

question 159

Multiple Choice

XYZ company, a distributor of auto parts, is in debt to the bank for $35,000 due on February 25, 2012. The company is having difficult times and wants to negotiate with the bank to pay only $33,000 as payment in full. With these facts in mind, which of the following statements of the law is false?

• A) So long as they don't take the money, the bank can still sue for the entire amount.
• B) At common law, if the bank accepted the $33,000 as payment in full, even absent additional consideration, it could not later sue for the remainder because such promises are always binding.
• C) If the company obtained from the bank the bank's promise to forgive the $2,000 under seal, the bank could not later sue for the remainder.
• D) In some jurisdictions, a statutory provision provides that the creditor who accepts less than full payment as payment in full cannot later sue for the remainder.
• E) If the bank agrees to accept the $33,000 as payment in full if paid early, by February 15, and the company does as requested, the bank could not later sue for the remainder because the company gave good consideration for the bank's forgiveness of the debt.

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Definitions:

Personal Income Tax

A tax levied on the taxable income of individuals, households, and unincorporated firms.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes, determined by subtracting allowable deductions from gross income.

Deductions

Expenses that can be subtracted from gross income to determine taxable income, thereby potentially reducing the amount of taxes owed.

Exemptions

Provisions in tax law that allow taxpayers to reduce their taxable income, often for specific activities or investments.