Prototypical Secured Transactions

Question 1

Benefits of Personal Guarantees

Answer 1

guarantor can pay the debts that the debtor fails to pay. Ensures lender will have cooperation of owners of businesses because either way they are on the hook

Question 2

You are ‘out of trust’ if you are

Answer 2

lying about the status of collateral

Question 3

Perfection

Answer 3

an action that varies based on type of collateral that legally gives world notice of party’s interest in collateral

Question 4

Priority

Answer 4

legal conclusion that a particular claim to collateral is better than others

Question 5

FS requirements for effective FS

Answer 5

name of debtor (cannot be seriously misleading), secured party name, indication of collateral (can be supergeneric)

Question 6

Where do you file a FS

Answer 6

SOS UCC filing system

Question 7

Who can file a FS

Answer 7

authorized parties only - if DR authorizes SA, cr has authority to automatically file. Otherwise, dr is the authorizing party

Question 8

Possession (mandatory and permissible)

Answer 8

Mandatory for money. Permissible for documentary collateral/tangible property

Question 9

Control (mandatory and permissible)

Answer 9

Mandatory for deposit accounts. Permissible for investment property

Question 10

Control rules for deposit accounts

Answer 10

secured party is the bank with the account, secured party and dr enter into control agreement, or add secured party to bank account as co-holder

Question 11

Control rules for certificated and direct investments

Answer 11

dr must deliver certificate to cr and endorsement or cr name goes on certificate

Question 12

Control rules for uncertificated and direct investments

Answer 12

deliver/re-register name on the books for the security

Question 13

Control rules for indirectly owned investments

Answer 13

If broker is secured party, automatic control. Create a control ag bw broker, secured party, debtor. Or list secured party on broker’s account.

Question 14

Automatic Perfection

Answer 14

PMSI - the loan that the SI secures must be used to buy the collateral

Question 15

Perfection outside of the UCC (mandatory, permissible)

Answer 15

Mandatory for cars and planes. Permissible for IP filing.

Question 16

3 items required for filing to be accepted by filing office

Answer 16

secured cr mailing address, debtor mailing address, indication of whether dr is individual or organization

Question 17

If the FS requirements are incorrect, what happens?

Answer 17

No matter what it is ineffective.

Question 18

If the FS requirements and filing office requirements are accurate, what happens if it is accepted?

Answer 18

Fully effective

Question 19

If the FS requirements and filing office requirements are accurate, what happens if it is denied?

Answer 19

considered filed and effective against lien creditors, but not secured parties and purchasers with reliance

Question 20

If the secured cr address is wrong and it is accepted by FO

Answer 20

Fully effective

Question 21

If the secured cr address is wrong and it is denied by FO

Answer 21

Ineffective, it was wrong and not filed

Question 22

If the debtor info (debtor mailing address, indication of whether dr is individual or organization) is incorrect and accepted, what happens?

Answer 22

effective for lien creditors, but not secured party and purchasers with reliance

Question 23

If the debtor info (debtor mailing address, indication of whether dr is individual or organization) is incorrect and denied, what happens?

Answer 23

ineffective, it was wrong and not filed

Question 24

How can you perfect goods

Answer 24

filing or possession

Question 25

How can you perfect chattel paper, tangible

Answer 25

filing or possession

Question 26

How can you perfect instruments

Answer 26

Filing or possession (possession preferred)

Question 27

How can you perfect deposit accounts

Answer 27

control

Question 28

How can you perfect electronic chattel paper

Answer 28

filing or control

Question 29

How can you perfect money

Answer 29

possession

Question 30

How can you perfect certificated security

Answer 30

filing or possession or control (control preferred)

Question 31

How can you perfect uncertificated security

Answer 31

Filing or control (control preferred)

Question 32

How can you perfect general intangibles

Answer 32

Filing

Question 33

What are the ways to perfect SI in fixtures?

Answer 33

Filing a UCC FS or a Fixture Filing or PMSI

Question 34

Fixture filing requirements

Answer 34

name of debtor (cannot be seriously misleading), secured party name, indication of collateral (can be super generic), state that it covers fixtures, describe RE, name of who owns RE. File with land records

Question 35

Fixture PMSI requirements

Answer 35

cr has to perfect SI before fixture becomes affixed or within 20 days after being affixed (cannot defeat construction PMSI though)

Question 36

Does the RE recording system ever delete documents?

Answer 36

No, only adds them

Question 37

Does the UCC system allow documents to be removed? How?

Answer 37

Yes - There is automatic termination at 5 years, and 1 year after this it must be destroyed. You can also file a termination statement or amend the initial FS

Question 38

What happens to priority when lapse occurs?

Answer 38

you are treated as though you were never perfected, but you still have perfection against lien creditors who filed after you. The collateral is still attached.

Question 39

When do you have to file a continuation statement?

Answer 39

During the last 6 months if you want to prevent lapse.

Question 40

If a secured party files a continuance rather than an entirely new FS, what happens to their priority?

Answer 40

This is the only way to keep their initial priority.

Question 41

What happens if a dr changes their name and the FS is now seriously misleading?

Answer 41

FS is effective as to existing collateral and any new collateral for next 4 months. FS isnt effective for collateral after 4 months. If cr files amendment within 4 month window, they keep priority.

Question 42

What happens if a new debtor is substituted for the other debtor?

Answer 42

New dr is bound by SA and original FS is good to perfect SI. If new debtor has name that makes FS seriously misleading, apply 4 month rule. Secured CR needs to file an entirely new FS to keep priority.

Question 43

Type 1 Changes affecting description of collateral

Answer 43

changes in use of collateral, dont make the FS seriously misleading

Question 44

Type 2 Changes affecting description of collateral

Answer 44

changes in the way the collateral needs to be perfected, secured cr becomes unperfected

Question 45

Type 0 changes in barters

Answer 45

The proceeds recd by dr fall within description already filed. SI is still perfected.

Question 46

Type 1 changes in barters

Answer 46

exchanging collateral for noncash proceeds and those proceeds arent covered by description in FS but doesnt change perfection method. SI is still perfected, no action.

Question 47

Type 2 changes in barters

Answer 47

Exchanging collateral for noncash proceeds and the proceeds required a different perfection method. Sec Cr has to file new FS in 20 days from time DR receives possession

Question 48

Collateral to cash proceeds

Answer 48

continuous and perpetual perfection in identifiable cash proceeds

Question 49

Collateral to cash to noncash - type 0

Answer 49

SI still perfected no action necessary

Question 50

Collateral to cash to noncash - type 1

Answer 50

Sec Cr has to file new FS in 20 days from time DR receives possession

Question 51

Collateral to cash to noncash - type 2

Answer 51

Sec Cr has to file new FS in 20 days from time DR receives possession

Question 52

When the debtor changes location, what does the SC have to do to maintain perfection?

Answer 52

they have 4 months to perfect a new SI in the new location. If they file after 4 months, they are deemed always unperfected against all but lien cr. If they never fix it, they are deemed unperfected against all