Secured Transactions

Question 1

What is attachment?

Answer 1

Attachment gives the creditor rights against the debtor in the collateral. To attach a security interest:

1. Either the debtor must authenticate a security agreement granting the creditor a security interest in collateral that describes the collateral or the creditor must take possession or control of the collateral;
2. The creditor must give value; and
3. The debtor must have rights in the collateral.

Question 2

How does a secured party perfect its interest?

Answer 2

A creditor can perfect its security interest in goods by:

1. Filing, in the proper public office, a financing statement that is authorized by the debtor in an authenticated record, or
2. Taking possession.

Question 3

What is a purchase money security interest (PMSI)?

Answer 3

A PMSI is created when a creditor advances credit or provides the funds needed to make a purchase possible and takes a security interest in the goods purchased.

Question 4

When is a PMSI perfected?

Answer 4

A PMSI is automatically perfected when it is attached.

Question 5

What are consumer goods?

Answer 5

Consumer goods are goods that a purchased primarily for personal, family, or household use.

Question 6

What is equipment?

Answer 6

Goods that are not consumer goods, inventory, or farm products are equipment. Generally, goods used for business purposes are equipment.

Question 7

What is the original use test?

Answer 7

Under the original use test, a debtor’s original intended use of a collateral will govern the collateral’s classification.

Question 8

Between two competing perfected security interests, which will prevail?

Answer 8

Between two competing perfected security interests, the first secured party to file or perfect has priority.