Perfection Flashcards
(22 cards)
Methods of Perfection
Automatic Possession of Collateral by SP Perfection by Control Notation of Lien on Certificate of Title Filing Financing Statement
Automatic Perfection
Perfection is automatic upon attachment
PMSI in consumer goods
Perfection by Possession
SI perfected moment when SP takes possession of collateral
Perfection by Control
Non-consumer deposit accounts
Investment Property
Electronic Chattel Paper
Perfection by Notation of Lien on Certificate of Title
ONLY way to perfect item covered by certificate of title
Filing FInancing Statement- Requirements
Debtor's Name Description of Collateral SP name Debtor authorizes Authenticated security agreement may be filed if it contains all requirements Filed in appropriate office
FS Debtor’s Name
If individual, name on unexpired license or individual name if no license. If corporation, corporate name; only trade name is insufficient
Errors are ok if they are not seriously misleading
FS Debtor’s name change
If name change is seriously misleading, previous FS valid for 4 months; need to amend FS to remain effective after 4 months
FS Description of Collateral
Reasonably identify collateral, supergeneric allowed unlike SA
FS Secured Party Name
Error in SP name will not be seriously misleading
FS for real property related financing
must also indicate to be filed in real property records
provide description of real property
name the record owner
FS Authorization
Debtor automatically authorizes FS if they authenticated a SA covering the same collateral
Where to file FS?
MI Secretary of State
Real Property- County Records where property located
How long is a FS effective?
5 years from date of filing
Can be extended by filing a continuation statement in last 6 months of 5 year life
Termination of FS
When there is no outstanding obligation of the debtor and no commitment
on the part of the secured party to make further advances, the secured
party, upon receiving an authenticated demand by the debtor, must within 20 days provide the debtor with a termination statement to the effect that the secured party no longer claims a security interest under the
financing statement.
If a financing statement covers consumer goods, then within one month after there is no outstanding obligation, or within 20 days of receiving an authenticated demand from the debtor, a termination statement must be filed by the secured party
Fraudulent Financing Statements
Under Michigan law, a debtor may file an affidavit with the secretary of state stating that a filed financing statement is fraudulent. The financing statement must be terminated upon receipt of the affidavit, and notice of the termination must be sent to the filer of the financing statement.
If the filer believes in good faith that the statement is not fraudulent, he may
sue to reinstate the financing statement. The court determines whether the
financing statement should be reinstated and must forward an order reinstating the financing statement to the secretary of state. A reinstated
financing statement is effective as a filed record from the initial filing date
Can a FS be filed prior to a SA?
Yes
Perfection when there is a change in the use of collateral
Filed FS remains effective to perfect the security interest
Perfection of Non-Consumer Deposit Accounts
ONLY way to perfect is by control
If controlling bank, automatic control
If not a bank, then putting the account in SP name OR by control agreement between debtor, bank, and SP
Perfecton as to Proceeds
IF SP has a perfected interest in collateral, then automatically perfected in proceeds for 20 days
To remain perfected past 20 days take a new action to perfect unless:
- proceeds are identifiable cash proceeds or
- S.I. in original collateral was perfected by FS, a S.I. in proceeds would be perfected the same way, and proceeds were not purchased with cash proceeds of collateral
What if collateral changes states?
The secured party will become unperfected one year after the collateral moves unless it files a financing statement in the new jurisdiction
before that one-year period is up.
What if Debtor moves states?
The secured party will become unperfected 4 months after the debtor’s move unless it files a financing statement in the new jurisdiction
before that 4-month period is up.
