FL secured transactions Flashcards
(32 cards)
how is it tested
MPC
secured transaction: overview
- 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.
Purchase Money Security Interest (PMSI): What Is It?
- 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.
Purchase Money Security Interest (PMSI): First Method of Obtaining a PMSI - Selling of Goods on Credit
- Retailer lend you money to buy
- Buy tv from best buy on best buy credit
- Automatically have PMSI
Purchase Money Security Interest (PMSI): second Method of Obtaining a PMSI – Lending the Money to Purchase a Consumer Good
- Someone other than retailer lends you money to buy
- Buy tv from best buy through chase
Purchase Money Security Interest (PMSI): why is it important?
- 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
what can be collateral?: Tangible Collateral or Goods
- 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
what can be collateral?: Intangible or Semi-Tangible Collateral
- Negotiable instruments (lien on note/draft)
- Warehouse receipts (Article 4)
- Accounts receivable
What Can Be Collateral?: proceeds
- 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
Attachment – Creating the Security Interest: introduction
- 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
attachment- creating the security interest : three requirements
- Must co-exist at the same time
- Debtor has rights in collateral
- Debtor has a right to do something with the collateral
o Does not mean they own the collateral - The value must be given by the secured party
- Given something in exchange
- 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
attachment- creating the security interest : Requirement 1 - Agreement to Create a Security Interest
- 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”)
attachment- creating the security interest : Requirement 2 – Value Given by the Secured Party
- Secured party (creditor) has to give something of value
- Typically financing transaction itselF
- No free liens
attachment- creating the security interest : Requirement 3 – Debtor has Rights in the Collateral
- Usually debtor has right to title, they own it
attachment- creating the security interest : Can After-Acquired Property Be Collateral?
- 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.”
Perfection of Security Interest: Intro
- 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
Perfection of Security Interest: Can You Perfect Before Attachment?
- 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
Perfection of Security Interest: The Five Ways to Perfect an Attached Security Interest
- filing
- perfection by possession
- perfection by control
- PMSI automatic perfection
- temporary perfection
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 1 – Filing
- 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
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 2 – Perfection by Possession
- If creditor takes possession, it is perfected moment they take possession
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 3 - Perfection by Control
- security interest creditor perfected moment creditor takes control of collateral
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 4 - PMSI Automatic Perfection
- Automatically perfected the moment it attaches
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 4 - PMSI Automatic Perfection
- Automatically perfected the moment it attaches
Perfection of Security Interest: : The Five Ways to Perfect an Attached Security Interest: Method 5 – Temporary Perfection
- When it happens to proceeds= what you get from sale of attached collateral
- Automatically, but only temporarily perfected for 20 days
