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Legal & Regulatory Aspects of FP > Chapter 15 - Secured Transactions > Flashcards

Chapter 15 - Secured Transactions Flashcards

1
Q

What are Fixtures?

A

Goods that have become attached to real estate

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2
Q

What is a Security Interest?

A

An interest in personal property of fixtures that secures the performance of an obligation

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3
Q

What is a Secured Party?

A

A person or company that holds a security interest.

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4
Q

What is Collateral?

A

Property that is subject to a security interest.

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5
Q

What is a Debtor?

A

A person who has original ownership interest in the collateral.

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6
Q

What is a Security Agreement?

A

A contract in which the debtor gives a security interest to the secured party.

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7
Q

What is Perfection?

A

A series of steps the secured party must take to protect its rights in the collateral against people other than the debtor.

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8
Q

What is a Financing Statement?

A

A document that the secured party files to give the general public notice that is has a security interest in the collateral.

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9
Q

What is Record?

A

Information written on paper or stored in an electronic or other medium.

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10
Q

What is Authenticate?

A

To sign a document or to use any symbol or encryption method that identifies the person and clearly indicates she is adopting the record as her own.

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11
Q

What body of law governs secured transactions in personal property?

A

The UCC (Uniform Commercial Code), Article 9

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12
Q

Article 9 of the UCC applies to what?

A

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

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13
Q

What are the types of personal property that may be used as collateral? 5

A
  • Goods, which are things that are moveable
  • Inventory, meaning goods held by someone for sale or lease, such as all the beds and chairs in a furniture store.
  • Instruments, such as drafts, checks, certificates of deposit, and notes.
  • Investment Property, which refers primarily to securities and related rights
  • Other property, including documents of title, accounts, general intangibles (copyrights, patents, goodwill, and so forth), and chattel paper (for example, a sales document indicating that a retailer has a security interest in goods sold to a consumer). Slightly different rules apply to some of these forms of property, but the details are less important than the general principles on which we shall focus.
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14
Q

What is Attachment?

A

A three-step process that creates an enforceable security interest.

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15
Q

What are the three steps of Attachment?

A
  • The two parties made a security agreement and either the debtor has authenticated a security agreement describing the collateral, or the secured party has obtained possession.
  • The secured party has given value to obtain the security agreement
  • The debtor has rights in the collateral.
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16
Q

What did the 2010 Amendments of Article 9 of the UCC address?

A

The names used on a contract. It stated that for an individual, the name on a financing statement must be the same as on the person’s driver’s license, if one exists.

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17
Q

How long is a financing statement effective for?

A

Five years. After five years, the statement will expire and leave the secured party unprotected unless she files a continuation within six months prior to expiration. This extends it for another five years.

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18
Q

A financing statement can last for longer than five years for what product?

A

A manufactured home

19
Q

Where must a party file perfection, generally?

A

In a central filing office located in the state where an individual debtor lives or where an organization has its executive office.

20
Q

What is the duty imparted to a creditor that has perfected by possession?

A

A secured party must use reasonable care in custody and preservation of collateral in her possession.

21
Q

What is PMSI?

A

Purchase Money Security Interest - An interest taken by the person who sells the collateral or advances money so the debtor can buy it.

22
Q

Why is PMSI given to merchants selling goods on credit?

A

They cannot reasonable file a financing statement for every bed, TV, a stereo for a consumer which owes it money

23
Q

How does a PMSI perfect?

A

With filing. UNLESS it is for consumer goods, in which case it perfects automatically

24
Q

What are consumer goods?

A

Those used primarily for personal, family, or household use.

25
Q

What consumer goods does a PMSI automatically perfecting not apply to? 5

A 
Motor vehicles
Trailers
Mobile Homes
Boats
Farm Tractors
26
Q

What is a Buyer in Ordinary Course of Business?

A

Someone who buys goods in good faith from a seller who routinely deals in such goods.

27
Q

Does a creditor have security interest in something if the debtor sells it?

A

Yes, the creditor can get the items wherever they are and get them back, mostly.

28
Q

When is BIOC status not be achieved (when it otherwise would be allowed)?

A

If a buyer knows the seller was bankrupt and had agreed with a creditor not to sell any of this inventory, the seller would not achieve BIOS status.

29
Q

When is BIOC status available?

A

Only when the seller created the security interest. It isn’t available if they bought something that had a security interest created by someone other than the seller.

30
Q

What are the three rules that determine which creditors get priority if the debtor defaults?

A
  1. A party with perfected interest takes priority over a party with an unperfected interest.
  2. If neither party has perfected, the first interest to attach get priority.
  3. Between perfected security interests, the first to file or perfect wins.
31
Q

What is the exception to the rule that a bankruptcy trustee would take priority over all security interests that are perfected on the day that a debtor files a bankruptcy petition?

A

If the creditor files a financing statement for a PMSI withing 20 days after the debtor receives the collateral, that security interest is deemed to have been perfected as of the date of which the debtor received that collateral, not the day on which the financing statement was filed.

32
Q

What are the two general cases that cause a debtor to default?

A

-He fails to make payments due
or
-He enters bankruptcy proceedings

33
Q

What are the two options available to the secured party when a debtor defaults?

A
  1. It may take possession of the collateral
    or.
  2. It may file suit against the debtor for the money owed.

The secured party does not have to choose between the two remedies, it may try one after the other, or both simultaneously.

34
Q

When a debtor defaults, under what condition can a secured party take possession of the collateral without a court order?

A

If it can take the collateral without a breach of the peace.

35
Q

What are the two options available to a secured party when it has obtained possession of the collateral after a default?

A

-Dispose of the collateral
or
-Retain the collateral as full satisfaction of the debt.

36
Q

Up until when does the debtor still have the option after initially losing possession of the collateral to redeem the collateral (pay full value and retrieve it)?

A

Until the creditor has disposed of the collateral.

37
Q

What must a secured party do if the debtor pays the debt in full?

A

File a termination statement indicating that it no longer claims a security interest in the collateral.

38
Q

What might an agreement state?

A
  • Who is buying what from Who
  • Price, Down payment, Monthly Payments, Interest Rate
  • State that the creditor has a security interest
  • Sets response to a default
39
Q

What is After-Acquired Property?

A

Items that the debtor obtains after the parties have made their security agreement.

40
Q

How does someone with an after acquired clause get a security interest in a new purchase of the debtor?

A

Automatically

41
Q

What are the most common kinds of perfection?

A
  • Perfection by filing
  • Perfection by possession
  • Perfection of consumer goods
42
Q

What does a financing statement say? 3

A
  • The names of all the parties
  • Description of the collateral
  • Outlines the security interest
43
Q

What are the two most common problems that arise in cases with filing perfection?

A
  • Whether the financing statement contained enough information to put other people on notice of the security interest.
  • Whether the secured party filed the papers in the right place

Legal & Regulatory Aspects of FP (26 decks)

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