Perfection

Question 1

What are the ways an SI can be perfected?

Answer 1

1. Filing a financing statement
2. Possession
3. Control
4. Automatic perfection

Question 2

What is the purpose of a filing statement?

Answer 2

Gives interested parties notice of the existence of the SI, and perfects

Question 3

What security interests cannot be perfected by a financing statement?

Answer 3

Deposit accounts, money, or letter-of-credit rights

Question 4

What is necessary for a valid financing statement?

Answer 4

1. Proper filing with essential elements

2. Authorization by the debtor

Question 5

If collateral relates to real property, what must you also show?

Answer 5

1. SA covers this collateral
2. Note that it will be filed in record office
3. Describe the related real property
4. Name record owner of real property, if not debtor

Question 6

What should you, but need not, include in a filing?

Answer 6

Address for both parties and indicate whether the debtor is an individual or a corporation

Question 7

What essential elements are required for a properly filed financing statement?

Answer 7

1. Name of debtor
2. Name of the secured party
3. Description of the collateral
4. Correct filing office

Question 8

When is a filing statement authorized?

Answer 8

Authentication of an SA automatically authorizes the financing statement, otherwise with a signature

Question 9

If someone fails to authorize a filing statement, what can happen?

Answer 9

The secured party may be liable in actual or statutory damages

Question 10

When do errors in a filing statement prevent perfection?

Answer 10

Only when they are seriously misleading.

Question 11

When is an error in a debtor’s name not seriously misleading?

Answer 11

When a search would uncover the error

Question 12

When does a financing statement lapse and render the SI unperfected?

Answer 12

After five years, or when a termination statement ends the financing statement

Question 13

Can a debtor’s trade name be used in the filing statement?

Answer 13

It is insufficient by itself

Question 14

Who can file a financing statement?

Answer 14

Anyone

Question 15

For collateral related to real property, where must a financing statement be filed?

Answer 15

The recorder’s office

Question 16

For collateral that is not related to real property, where must it be filed?

Answer 16

The secretary of state of the state of the debtor’s location

Question 17

Where is the debtor’s location?

Answer 17

1. Individual = principal residence
2. Nonregistered org (P) - place of biz; if more than one, CEO
3. Registered org - incorporation

Question 18

What is the effective date of filing?

Answer 18

Upon delivery to the filing office and tender of the filing fee

Question 19

If the filing office refuses to accept, what happens?

Answer 19

If justified, it is treated as having not been filed

If unjustified, it is treated as having been filed, and is effective except against subsequent purchasers who rely on the absence of the record

Question 20

Does a continuation statement require the debtor’s signature?

Answer 20

No

Question 21

If a filing office indexes the statement incorrectly, does it affect the effectiveness of the statement?

Answer 21

No

Question 22

What is the effective date of an amendment to a financing statement?

Answer 22

From the date of filing

Question 23

Does an amendment to a financing statement extend the period of effectiveness?

Answer 23

No

Question 24

What is the only method of perfect for a deposit account?

Answer 24

Control

Question 25

How are PMSI in consumer goods perfected?

Answer 25

Automatically upon attachment. Note: other PMSIs require financing statements

Question 26

If the debtor's legal name changes and becomes seriously misleading, how long does the secured party have to file an amendment?

Answer 26

4 months

Question 27

If a debtor moves out of state, for how long will a financing statement remain perfected?

Answer 27

4 months

Question 28

If a debtor moves out of state, how can the secured party stay continuously perfected?

Answer 28

Refile in the new state within the four month window

Question 29

If the debtor moves out of state with the collateral, must the secured party refile?

Answer 29

No

Question 30

If the collateral moves to a debtor in another state, how long does the secured party have to refile?

Answer 30

One year

Question 31

What is the effect of a lapse on perfection?

Answer 31

It ceases to be perfected

Question 32

When are proceeds perfected?

Answer 32

If the SI in the original collateral was perfected, the proceeds perfect for 20 days from attachment. If the FS was broad enough to cover proceeds, they are perfected indefinitely

Question 33

What is the Cash Proceeds Rule?

Answer 33

Perfection continues if cash proceeds are identifiable

Question 34

What is the Same Office Rule?

Answer 34

A perfected SI continues as to proceeds when: (1) the FS covers the original collateral, (2) the proceeds are collateral that would be filed in the same office, and (3) proceeds are not acquired with cash proceeds

Question 35

When can a transferee take collateral free of a security interest?

Answer 35

1. Consumer buyer, or | 2. Buyer in the ordinary course of business (BOCB)