Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

fl bar > FL secured transactions > Flashcards

FL secured transactions Flashcards

1
Q

how is it tested

A

MPC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

secured transaction: overview

A
  • creating liens on personal property
  • Someone called the “debtor” purchases someone on credit from “creditor/secured party” to ensure payment received for item debtor purchased, secured party takes security interest= collateral.
  • If the borrower “Debtor” doesn’t pay, take collateral and sell it to pay what they owe you.
  • When you take the lien, you attach the collateral.
  • Attach security interest to collateral.
  • Multiple parties can attach the same collateral.
  • The order in which you file the liens, “attach” is important.
  • To make sure lien has priority in foreclosing against multiple creditors, must “perfect” the security interest.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Purchase Money Security Interest (PMSI): What Is It?

A
  • Special type of security interest lien in consumer goods.
  • Creditor that holds PMSI has priority in default over other security interests.
  • Super lien.
  • Automatically perfected.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Purchase Money Security Interest (PMSI): First Method of Obtaining a PMSI - Selling of Goods on Credit

A
  • Retailer lend you money to buy
  • Buy tv from best buy on best buy credit
  • Automatically have PMSI
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Purchase Money Security Interest (PMSI): second Method of Obtaining a PMSI – Lending the Money to Purchase a Consumer Good

A
  • Someone other than retailer lends you money to buy
  • Buy tv from best buy through chase
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Purchase Money Security Interest (PMSI): why is it important?

A
  • PMSI status gives creditors rights in collateral, attachment of security interest occurs at the moment of signing
  • They have automatic lien on security
  • Has an automatic perfection, too
  • Essentially, creditor is first in line if buyer defaults
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what can be collateral?: Tangible Collateral or Goods

A
  • Consumer goods, things you buy for the buy
  • Inventory- goods held for business for sale/lease
  • Farm products, like crops and animals
  • Business equipment, not for sale but used to run business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what can be collateral?: Intangible or Semi-Tangible Collateral

A
  • Negotiable instruments (lien on note/draft)
  • Warehouse receipts (Article 4)
  • Accounts receivable
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What Can Be Collateral?: proceeds

A
  • Can lien a proceed, take a form of collateral (reselling consumer goods, give you a lien which attaches to it, but before this happens I sell it and convert it to cash, it becomes a proceed; we transfer lien from original collateral to the proceed)
  • Proceed- whatever you get from exchanging, selling, disposing collateral
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Attachment – Creating the Security Interest: introduction

A
  • In order to have any rights in collateral, creditor must create a security interest that attaches to it
  • no security interest, no attachment, no lien
  • attachment gives creditor the right to take the collateral, debtor does not pay
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

attachment- creating the security interest : three requirements

A
  • Must co-exist at the same time
    1. Debtor has rights in collateral
  • Debtor has a right to do something with the collateral
    o Does not mean they own the collateral
    1. The value must be given by the secured party
  • Given something in exchange
    1. Agreement to create security interest
  • Show the creditor has possession of collateral, shows there is agreement to use collateral as security
  • Debtor can authenticate a security agreement, like a written doc
  • Control of collateral, creditor has some control (like they are joint account holder on bank account) shows security interest agreed to
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

attachment- creating the security interest : Requirement 1 - Agreement to Create a Security Interest

A
  • Taking possession
  • having control
  • Written security agreement
  • Has to describe collateral by category/type(Equipment, inventory, consumer goods), or other specificity (like serial number)
  • Super generic descriptions do not attach (“all of the debtors assets”)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

attachment- creating the security interest : Requirement 2 – Value Given by the Secured Party

A
  • Secured party (creditor) has to give something of value
  • Typically financing transaction itselF
  • No free liens
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

attachment- creating the security interest : Requirement 3 – Debtor has Rights in the Collateral

A
  • Usually debtor has right to title, they own it
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

attachment- creating the security interest : Can After-Acquired Property Be Collateral?

A
  • I have security interest which says chase has security interest on all of debtors equipment, tomorrow I buy a new cash register, does security interest also attach new piece of equipment bought after I signed security agreement? Yes
  • So long as agreement states something like “We hereby attach all of debtors equipment now owned or in the future acquired.”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Perfection of Security Interest: Intro

A
  • Attachment gives creditor right to collateral if debtor does not pay
  • Use profit to pay what was owed and give back any surplus
  • We have right to have Multiple creditors can attach
  • If debtor does not pay multiple creditors, order in which we pay when there is foreclosure is important
  • Highest level of protection (1st to be paid in foreclosure on asset), we want to perfect their security interest
17
Q

Perfection of Security Interest: Can You Perfect Before Attachment?

A
  • No, you need to have a security interest existing before it can be perfected
  • If someone takes steps to perfect the security interest and then they attach, the security interest is perfected the moment it is attached
  • No attachment until perfection in that circumstance
  • You could have perfected before attached, nothing valid, and another creditor attaches and perfects first
18
Q

Perfection of Security Interest: The Five Ways to Perfect an Attached Security Interest

A
  1. filing
  2. perfection by possession
  3. perfection by control
  4. PMSI automatic perfection
  5. temporary perfection
19
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 1 – Filing

A
  • Financing statement needs:
  • Has to have debtors name and mailing address
  • Secured party name and mailing address
  • Collateral covered by the financing statement
  • This is how you perfect it
20
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 2 – Perfection by Possession

A
  • If creditor takes possession, it is perfected moment they take possession
21
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 3 - Perfection by Control

A
  • security interest creditor perfected moment creditor takes control of collateral
22
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 4 - PMSI Automatic Perfection

A
  • Automatically perfected the moment it attaches
22
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 4 - PMSI Automatic Perfection

A
  • Automatically perfected the moment it attaches
23
Q

Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 5 – Temporary Perfection

A
  • When it happens to proceeds= what you get from sale of attached collateral
  • Automatically, but only temporarily perfected for 20 days
24
Q

Priority: Introduction

A
  • Allocation of interest among competing claims to the same collateral
  • Once debtor defaults, and they start foreclosure process to gather asset sell and get proceeds, who gets money first? Look to priority
25
Q

Priority Rules: Unperfected Secured Party vs. Unperfected Secured Party

A
  • The first to attach gets priority
26
Q

Priority Rules: Perfected Secured Party vs. Unperfected Secured Party

A
  • A perfected secured party always has priority over unperfected secured party
  • Doesn’t matter who got lien first
27
Q

Priority Rules: Perfected Secured Party vs. Perfected Secured Party

A
  • First party to perfect
28
Q

Priority Rules: The Mighty PMSI

A
  • Generally, PMSI has super priority over all other creditors
  • PMSI on consumer good and someone else comes and attaches and perfects, PMSI wins
  • If there are 2 PMSIs, for example if there is lender and seller as PMSI, seller has priority
29
Q

Priority Rules: Purchasers in Ordinary Course of Business and Holders in Due Course

A
  • Super priority: A buyer of collateral, in ordinary course of business, that does not know they are violating security interest, takes priority over everything
  • Extra priority: Holder in due course of negotiable instrument takes priority in getting paid for instrument over everyone except the person stated above (person who buys collateral in ordinary course of business, including PMSIs)
30
Q

Priority Rules: Purchasers in Ordinary Course of Business and Holders in Due Course

A
  • Super priority: A buyer of collateral, in ordinary course of business, that does not know they are violating security interest, takes priority over everything
  • Extra priority: Holder in due course of negotiable instrument takes priority in getting paid for instrument over everyone except the person stated above (person who buys collateral in ordinary course of business, including PMSIs)
31
Q

Rights of Creditor Upon Default of Payment Obligations: Take Possession and Sale of Collateral

A
  • Creditor doesn’t pay, foreclosure
    Creditor can (this is usually tested)
    1. Take possession of collateral
  • Creditor can do it without or with judicial intervention, if they can do it without breaching peace (if you do not need to use force to obtain collateral)
  • If cannot be done without breach of peace, need to get court involved (order of replevin, allows you to use force to get goods)
    2. Sell it
  • Sell it at public or private sale that is “commercially reasonable
  • Have to give 10 days notice to sale to debtor and other secured parties
  • Once sale occurs, it discharges all inferior security creditors
  • If collateral sells for less than money owed creditor can sue for deficiency judgment (many states allow this)

Technically, creditor can also choose to sue (not usually tested)

fl bar (26 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions