Attachment And Perfection

Question 1

Attachment

Answer 1

• Attachment is the process of creating a security interest and occurs when (1) the debtor agrees to the security, (2) receives value from the secured party, and (3) obtains rights in the collateral. UCC § 9-203(b).
• Attachment secures the creditor’s rights in the collateral and makes the security interest enforceable.

Question 2

Attachment requirements

Answer 2

Under UCC § 9-203(b), three criteria must be satisfied:

1. ”Value must be given”. UCC § 9-203(b)(1).
2. The debtor must have rights in the collateral or the power to transfer it to the secured party. UCC § 9-203(b)(2).
3. Either the debtor must have authenticated (signed or its electronic equivalent) a security agreement that provides a description of the collateral or the secured party must have taken possession of the collateral pursuant to the debtor’s security agreement. UCC § 9-203(b)(3).

Question 3

Security agreement requirements

Answer 3

1. Record showing intent to create a security interest;
2. Authenticated (signed/symbol)
3. ”Reasonably identify” the collateral, e.g., by collateral type, but super-generic description not acceptable)

Question 4

Value given requirement

Answer 4

Secured party (i.e., creditor) must give value to create security interest.

• e.g., creditor loans the debtor money or delivers equipment in exchange for SI
• almost any consideration is sufficient as is pre-existing debt

Question 5

Debtor’s rights in the collateral

Answer 5

• Debtor must have rights in the property she offers as collateral
• Ownership or possessory interest usually sufficient

Question 6

Significance of perfection

Answer 6

A perfected security interest has priority over collateral as compared to other unperfected security interests in the same collateral

Question 7

What does perfection do?

Answer 7

Perfection gives notice of the creditor’s rights in the collateral and determines the priority of interests

Question 8

Attachment as prerequisite

Answer 8

Attachment is a prerequisite for perfection although attachment and perfection can happen simultaneously

Question 9

Methods of perfection

Answer 9

1. Filing financing statement
2. Taking possession of the collateral
3. Automatic perfection
4. Control

Question 10

Financing statement requirements

Answer 10

1. Provide name of debtor and secured party
2. Indicate the collateral, and
3. Be filed by the person authorized by the debtor

Question 11

Automatic perfection

Answer 11

Perfection is automatic if:

1. Consumer PMSI or
2. Attachment of an assignment of accounts if it does not transfer a significant part of the outstanding accounts of the assignor

Question 12

Perfection for PMSIs

Answer 12

• PMSI for consumer goods: automatic perfection for PMSI
• PMSI for nonconsumer goods: takes priority if the creditor files a financing statement before/within 20 days after debtor receives delivery

Question 13

Requirements for attachment

Answer 13

1. Creditor extended value to debtor
2. Debtor has rights in the collateral, and
3. One of the following

• authenticated record/security agreement memorializing the security interest
• collateral is in secured party’s possession pursuant to a security agreement
• collateral is a certificated security in registered form and the security certificate has been delivered to the secured party pursuant to a security agreement, OR
• secured party has control of certain types of collateral pursuant to a security agreement

Question 14

Perfection of security interest in proceeds

Answer 14

A security interest in proceeds is a perfected security interest if the security interest in the original collateral was perfected.

UCC § 9-315(c)

**but this perfection ceases after 20 days unless one of three criteria in UCC § 9-315(d) is satisfied

Question 15

Continuation of perfection of security interest in proceeds

Answer 15

A perfected security interest in proceeds becomes unperfected on the 21st day after the security interest attaches to the proceeds unless:

(1) the following conditions are satisfied:
(A) a filed financing statement covers the original collateral;
(B) the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and
(C) the proceeds are not acquired with cash proceeds;

(2) the proceeds are identifiable cash proceeds; or

(3) the security interest in the proceeds is perfected other than under subsection (c) when the security interest attaches to the proceeds or within 20 days thereafter.

UCC § 9-315(d)