Secured Transactions

Question 1

Article 9 UCC

Answer 1

Applies to any transaction intended to create a security interest in personal property or fixtures

A security interest gives a creditor the right to sell a debtors property to satisfy a debt

Question 2

Parties of Article 9

Answer 2

Secured party: is the creditor with the security interest
Debtor: party with the ownership interest in the persona obligation
Obligor: party held responsible for the underlying obligation (generally also the debtor but also could be a guarantor)

Question 3

Collateral

Answer 3

The property in which a security interest is created

Question 4

Types of Collateral

Answer 4

Goods: all things that are movable
Consumer Goods: goods that are used mainly for personal, family or household purposes
Inventory: goods that are kept by person for sale or lease
Accounts: security interest in debtor’s accounts

Question 4

Attachement

Answer 4

How a security interest is created

Security interest attaches to collateral when it become enforceable against the debtor

Requirements:
1. secured party extends value to the debtor
2. the debtor has rights in the collateral or the power to transfer rights to the secured party AND
3. a UCC 9-203(b)(3) condition is met
-usually satisfied by authentication of a security agreement r when party takes possession or control

Question 4

Authentication

Answer 4

requires debtor to authenticate the agreement by providing the secured party with a reasonable description of the collateral in writing
-then signature, thumb print etc are all enough as long as the debtor possessed the intent to authenticate the writing

Question 4

Perfection

Answer 4

Once the security interest attaches then it is enforceable

If the security interest does NOT attach then it cannot be perfected

Methods for SI to be perfected:
1. Filing: the filing of a financing statement or the security agreement with the state
-must have the debtors name, the secured party’s name, an adequate description of the collateral AND the filing fee

2. Taking possession
3. automatic perfection:

-

Question 4

Priority Rules

Answer 4

-perfected security interest has priority over a conflicting unperfected SI in same collateral

-multiple perfected creditors: first to file obtains priority
-if collateral that cannot be filed–the first to perfect

Lein creditors:
basically same status as perfected secured creditors