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Flashcards in Secured Transactions Deck (9)
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When does a security interest attach; or become legally enforceable?

Secured interest must be supported by consideration given (GIVEN VALUE)

Debtor must actually own the RIGHTS to the collateral or have possession

Secured interest much be recorded (oral or written AGREEMENT)


What are the characteristics of perfection of interest in a secured transaction?

Gets higher priority over others claiming rights to collateral after the perfection takes place

Attachment must take place BEFORE perfection


How does perfection occur in a secured transaction?

By filing a financing statement (only way for intangible property)

By possessing or controlling the collateral (stocks, bonds, or negotiable instruments)

By attachment (PMSI creditor in consumer goods and small scale assignments of account)


When does automatic perfection occur in a secured transaction?

Store sells a consumer good on credit - Store retains security interest

A bank finances the purchase of a consumer good - Bank retains security interest


What are the priority rules for payment in a secured transaction?

If two parties are perfected; then the first one to file wins

If neither party is perfected; then the first one to attach wins


What are the advantages of a creditor holding a lien in a secured transaction?

Creditor holds priority over claims to collateral vs. unperfected security interests

Beats perfected security interests filed after lien attachment

Exceptions: Purchase money security interest; which has a 10 day grace period to be filed

Buyers purchasing in the ordinary course of business are immune from security interests held by merchants


What is a secured transaction?

Debt that is secured by personal property.


What is a purchase money security interest creditor?

A creditor who advances money or credit to enable a debtor to obtain property and retains a security interest in that property.


What is the after acquired property clause?

Clause giving creditor security interest in property acquired by debtor after the security agreement is executed.