Secured Transactions Flashcards
1
Q
UCCC Article 9 applies to _______.
A
Consensual security interests in personal property/fixtures
2
Q
Consensual security interests are also known as _______.
A
Voluntary
3
Q
Personal property and fixtures includes _____ but not ______.
A
Goods
Real property
4
Q
For security interests in real property, the law of ________ applies.
A
Mortgages
5
Q
A secured transaction occurs when a _____ through a ______ creates a ______ in favor of _______.
A
Debtor
Security agreement
Security interest
Secured party
6
Q
What is collateral in a secured transaction?
A
The property subject to the security interest
7
Q
What is a debtor in a secured transaction?
A
Person/entity with property rights in the collateral
8
Q
What is a security agreement in a secured transaction?
A
Agreement that creates/provides for a security interest regardless of:
1. What parties call it
2. Its form
9
Q
What is a security interest in a secured transaction?
A
Interest in personal property/fixtures which secure payment/performance of an obligation
10
Q
What is a security party in a secured transaction?
A
The person/entity who lends the money to the debtor in exchange for consensual security interest in personal property/fixtures
11
Q
A secured party is also known as a secured _____.
A
Creditor
12
Q
What is collateral in a secured transaction?
A
Property subject to a security interest that the creditor can look to for satisfaction for the debt
13
Q
Who is an obligor in a secured transaction?
A
Person or entity obligated on the debt.
14
Q
Usually (but not always), the debtor and _______ are one and the same.
A
Obligor
15
Q
What is a PMSI?
A
Purchase money Security Interest
16
Q
A PMSI arises when __________.
A
The secured party advances money or credit to enable the debtor to purchase the collateral
17
Q
What is an account in a secured transaction?
A
A right to payment of a monetary obligation for property that has been/is to be sold or for services rendered
18
Q
What are the five categories of tangible collateral?
A
- Consumer goods
- Inventory
- Farm products
- Equipment
- Fixtures
19
Q
How tangible collateral is classified turns on ________ or ________.
A
Debtor’s principal
Primary use for it
20
Q
In terms of tangible goods, consumer goods are _______
A
Used/bought primarily for personal, family, or household purposes
21
Q
In terms of tangible goods, inventory goods are:
A
- Goods held for sale/lease to others in the ordinary course of business
- Raw materials
22
Q
In terms of tangible goods, farm goods are _______
A
Goods (other than timber) which the debtor is engaged with in a farming operation
23
Q
In terms of tangible goods, categories of farm goods include:
A
- Crops
- Livestock
- Products of crops/livestocks in remanufactured states
- Supplies used/produced in farming operations
24
Q
In terms of tangible goods, equipment is _______
A
Items used in business that are not:
1. Inventory
2. Farm products OR
3. Consumer goods
25
In terms of tangible goods, fixtures are _______
Good that are so related to particular real property that interest arises under real property
26
Classification of intangible/quasi-intangible collateral depends on __________.
The nature of the collateral
27
In terms of intangible & quasi-intangible collateral, instruments are:
1. Notes
2. Drafts
3. CODs
etc.
28
In terms of intangible & quasi-intangible collateral, documents are:
1. Bill of landing
2. Receipts
etc.
29
In terms of intangible & quasi-intangible collateral, chattel paper is ________.
Record evidencing both:
1. A monetary obligation AND
2. A security interest in/lease of specific goods
30
In terms of intangible & quasi-intangible collateral, accounts are ______
Right to payment of monetary obligation for property that has been/is to be sold/for services rendered
31
In terms of intangible & quasi-intangible collateral, deposit accounts are _________ deposit accounts only
Non-consumer
32
In terms of intangible & quasi-intangible collateral, certificated securities are:
1. Stocks
2. Bonds
3. Mutual fund
etc.
33
In terms of intangible & quasi-intangible collateral, certificated securities are also known as ____________.
Investment property
34
In terms of intangible & quasi-intangible collateral, commercial tort claims are:
Tort claims that:
1. Arose out of the individual's business AND
2. Don't involve personal injury
35
In terms of intangible & quasi-intangible collateral, general intangibles are ________.
Intangibles that don't fall into any of the other categories above
36
The creation of a security interest requires a valid ____________.
Security agreement
37
Against/between whom is a security agreement effective?
1. Between the parties
2. Against purchasers of the collateral AND
3. Against creditors
38
An effective security agreement must be authenticated by ________.
The debtor
39
How can an effective security agreement be authenticated by a debtor?
1. Signed by debtor OR
2. Electronically marked
40
A security agreement must contain a description of _______.
The collateral
41
A description of collateral is sufficient for a security agreement if ________________.
It reasonably identifies what collateral the parties intended the security interest to cover
42
Article 9 whether title to the collateral is held by ______ or ______.
The debtor
The secured party
43
Attachment answers what question?
Is the security interest enforceable?
44
What is attachment?
The process by which the debtor/creditor creates a security interest in the debtor's property that is effective between these two parties
45
Security interest attaches to the collateral when ____________ unless _______.
It becomes enforceable against the debtor with respect to that collateral
The agreement explicitly states otherwise
46
What are the three requirements for attachment?
1. Parties agree that the security interest will attach to the collateral
2. Creditor must give value
3. Debtor must have rights in the collateral
47
One the attachment requirements are met, a security interest attaches immediately unless _________.
The parties have expressly agreed to postpone the time for attachment
48
Parties must have an agreement that the security interest will attach to collateral unless _________.
Secured party is in possession of collateral
49
A secured party must give value before attachment is allowed. Value is defined as _________.
Any consideration sufficient for a basic contract
50
_______ alone does not mean debtor has rights in the collateral
Possession
51
A debtor has rights in collateral when:
1. Debtor has outright ownership of the collateral
2. Debtor has possession via contract
3. Good are identified when marked, packaged, or otherwise designated as goods satisfying a particular contract
52
A security interest can be created in the property the debtor doesn't currently own but ______________.
The debtor may/will acquire that property in the future
53
Under the doctrine of after-acquired property clauses, when a debtor acquires new property in the future, the secured creditor's security interest will automatically __________.
Attach to that property
54
If parties intend after-acquired property to be included as part of collateral, they must _________.
Specify this in their transaction documents
55
After-acquired property clauses are enforceable except in regards to:
1. Inventory or accounts are receivable
2. Consumer goods
3. Commercial tort claims
56
An after-acquired property clause is not required when the collateral is inventory or accounts receivable, but a careful attorney will __________.
Include the after-acquired language in the transaction documents anyway
57
An after-acquired property clause won't attach to after-acquired goods unless the debtor acquired the rights within ___________ after _________.
10 days
Secured creditor extended value
58
Non-possessory security interests in _____ goods are prohibited.
Household
59
An after-acquired property clause will not attach to commercial tort claims that ______________.
were not in existence when the security agreement was authenticated
60
A secured creditor can give value by making a commitment to give ____ to the debtor.
Future value
61
A commitment for future advances must be _____.
Definite
62
Perfection of the security process does what?
Ensures that the creditor's security interest in the debtor's collateral is good against the rest of the world.
63
Proper perfection by a secured party will protect her from _________.
Subsequent creditors who claim an interest in that same collateral
64
When the debtor or collateral locates in a jurisdiction, what law governs?
Local law of that jurisdiction
65
Perfection requires _____ plus ______.
Attachment
A perfection step
66
Perfection cannot occur until all requirements for ___________ have been satisfied.
Attachment
67
The UCC provides four methods for perfecting a security interest:
1. Filing
2. Possession
3. Automatic
4. Control
68
What is the most common method of perfection?
Filing a financing statement
69
A financing statement must indicate _______ and generally describe __________.
1. The security interest
2. Describe the collateral covered
70
The purpose of a financing statement is to ____________.
Provide interested parties with enough information to be able to make follow-up inquiries
71
A secured creditor may perfect by filing _______ instead of ________.
Filing a security agreement
Filing a financing statement
72
A financial statement must include the following:
1. Debtor's name/address
2. Secured creditor's name/address
3. Description of collateral
73
______ descriptions of collateral are acceptable for financing statements.
Very generic
74
Where must a financing statement be filed?
In one central public office specified under the state's adoption of the UCC code
75
Generally, a financing statement is filed where?
Secretary of State in the state where the debtor is located
76
If a debtor is an individual, she is located in __________.
The state of her principal residence
77
If a debtor is a registered organization, it is located _______.
In the state under whose laws it is organized
78
If collateral covers timbers, minerals, or fixtures, then the filing is done where?
The county where the collateral is located
79
Filing is the exclusive method of perfection for:
1. Accounts
2. General intangibles
80
At common law, possession means ________________.
Absolute physical control over the property that is sufficient to put 3rd parties on notice of the secured creditor/possessor's interest in the collateral
81
Perfection of a security interest that was perfected by possession becomes effective upon ___________ and is effective as long as ______________.
Possession
Possession continues
82
What types of collateral are covered?
1. Goods
2. Money
3. Negotiatble documents
4. Certificated securities
5. Instruments
6. Tangible chattel paper
83
There is automatic perfection upon attachment if the security interest is __________.
A purchase money security interest in consumer goods
84
A PMSI in consumer goods arises when _________.
The secured party advances money/credit to enable the debtor to purchase consumer goods
85
__________ controls a deposit account
The account's owner
86
The best way for a creditor wanting tp perfect a security interest in a deposit account would be to _________.
Change the name on the account to that of the creditor
87
____________ is the only way to perfect an interest in a deposit account
Control
88
A creditor has control via electronic chattel paper if:
1. There is a single copy
2. It is marked/designates the creditor as the assignee of record
3. The copy can only be changed with agreement by the creditor
89
Security interests in electronic chattel paper can be perfected by ______ or _______.
Chattel
Filing
90
What is investment property?
1. Stocks
2. Bonds
3. Rights in securities held by a broker
91
Stocks and bonds are represented by physical __________.
Certificates
92
A creditor gains control of stocks or bond by __________.
Taking delivery of the certificates with any necessary endorsements
93
The best way for a creditor to gain control over a securities account is by _________.
Becoming the holder of the account
94
Creditors become holders of security accounts by ___________.
Changing the name of the account to that of the creditor
95
A security interest in investment property can be perfected by either:
1. Filing OR
2. Control
96
A creditor gains control by getting the issue of the letter of credit to consent to ___________.
An assignment to the creditor of proceeds of the letter of credit
97
What are proceeds?
Anything acquired upon the sale, lease, licenses, exchange, or other disposition of collateral
98
A security interest in proceeds from the original collateral is continuously perfected for ______ from the date that ___________.
20 days
The debtor receives the proceeds
99
A security interest will continue to be effective beyond 20 days from the date the debtor receives the proceeds if:
1. Same office rule
2. Proceeds are identifiable cash proceeds OR
3. Security interest in proceeds is perfected within 20-day period
100
What is the same office rule?
1. Original security interest in collateral is perfected by filing a financing statement
2. Security interest in the collateral constituting the proceeds would be filed in the same office as the original financing statement AND
3. Proceeds not purchased with cash proceeds of the collateral
101
A secured party who gives new value under _____________ gets a 20-day perfection period from the moment of attachment.
An authenticated security agreement
102
What are the two ways that instruments, negotiable documents, and certificated securities can be temporarily perfected?
1. Secured party gives new value under an authenticated security agreement
2. Secured party delivers goods/negotiable documents to debtor for disposition
103
A secured party who delivers goods or negotiable documents to debtor for ________ gets a 20-day perfection period
Disposition
104
If a debtor moves states, and the debtor's location governs perfection, how long does temporary perfection last?
4 months
105
A secured party shall use reasonable care in ___________
The custody and preservation of collateral in the secured party's possession
106
In the case of chattel paper or an instrument, reasonable care includes __________________.
Taking necessary steps to preserve rights against prior parties unless otherwise agreed
107
In many cases a secured party in possession of collateral satisfies her duty of reasonable care by:
1. Notifying the debtor of action that should be taken AND
2. Allowing the debtor to take action itself
108
A secured party may charge the debtor for any reasonable expenses incurred in:
1. Custody
2. Preservation
3. Use
4. Operation
Of the collateral
109
A secured party may retain rents, issues and profits as additional security, but _________.
Any money recieved from the collateral must either be returned to the debtor or applied against the secured obligation
110
The risk of accidental loss or damage is on ______ to the extent that __________.
The debtor
The secured party's insurance is insufficient
111
What is the right to re-pledge?
The secured party may re-pledge collateral to a 3rd party so long as this doesn't impair the debtor's ability to redeem the collaeteral
112
How may a secured party use/operate the collateral?
1. For purpose of preserving the collateral or its value
2. Pursuant to court order OR
3. As agreed to by the debtor
113
What is accession?
Goods that are physically united with other goods so that their identity is not lost
114
May a security interest be created in an accession?
Yes
115
If a security interest in the accession is perfected when __________, the security interest remains perfected in the accession.
the accession is installed in other goods
116
Accession is subordinate to a securited interest perfected by ____________.
Compliance with certificate-of-title statute
117
A security interest in an accession is subordinate to a security interest in another good if the other good is ___________.
A vehicle requiring perfection to be obtained by noting the security interest on the certificate of title
118
What are commingled goods?
Goods that are physically united with other goods in such a matter that their identity is lost in a product/mass
119
Does a security interest exist in commingled goods?
Not really.
120
A security interest may attach to a product or mass that results when goods become ________ goods.
Commingled
121
If collateral becomes commingled goods, a security interest attached to ________
The product or mass
122
If more than one security interest attaches to a mass of commingled goods, the following rules determine priority:
1. Perfected prevails over unperfected
2. Equal if more than one perfected
123
Proper perfection gives the secured party priority over _______.
Competing unperfected creditors
124
Who is a buyer in the ordinary course?
Someone who purchases the collateral from a merchant's inventory
125
Who is a perfected attached creditor?
Article 9 creditor who succeeds in perfecting the security interest
126
Someone can become a lien creditor by either ______ or ______.
Judicial liens
Possessory liens
127
A lien creditor is created via judicial liens if:
General creditor
1. Wins in court AND
2. Gets a judicial lien on D's collateral
128
What is a possessory lien?
Lien imposed by state law in favor of people who, in ordinary course of business, have performed services for or furnished materials to the debtor in advance of payment
129
Who is a buyer in non-ordinary course?
A buyer who purchases the collateral outside the stream of ordinary commerce
130
Who is an attached unperfected creditor?
Article 9 creditor who creates an enforceable security interest but either:
1. Never bothers to perfect the security interest OR
2. Tries to perfect but does so incorrectly
131
Who are general unsecured creditor?
Lender who never bothered to take collateral from the debtor in exchange for the loan
132
Each claimant is entitled to payment in full before ___________ is entitled to take.
Subordinated claimant
133
List the order of priority among conflicting security interests.
1. Buyer in ordinary course
2. Perfected attached creditor
3. Lien creditor
4. Non-ordinary course buyer
5. Attached unperfected creditor
6. General unsecured creditor
134
Who always has first priority among conflicting security interests?
Buyer in the oridnary course
135
A buyer in the ordinary course always has priority and takes the property free of any ___________.
Perfected security interest in the merchant's inventory
136
If a perfected attached creditor files before attachment, _________ relates back to filing date for purposes of priority.
Subsequently attached security interest
137
Under the UCC, special effect is given to _______ when determining priority.
Filing
138
When there are two perfected attached creditors, which is first in right?
First in time to either:
1. File OR
2. Perfect
139
A PMSI in non-inventory collateral has priority over conflicting security interests in the collateral and its proceeds if PMSI is _________________
Perfected within 20 days of the debtor taking possession of the collateral
140
A PMSI inventory collateral has priority over conflicting security interests in the collateral and its identifiable proceeds if PMSI creditor _______________.
Perfects and sends notice of the transaction to the other perfected creditors before the debtors receives possession of the collateral
141
A creditor with _______ has priority over a creditor who perfected by filing.
Control
142
If more than one creditor has control, _______ has priority.
The first to have gained control
143
Attached unperfected creditors will prevail over:
1. Debtor
2. Subsequent attached unperfected creditors AND
3. General unsecured creditors
144
An attached unperfected creditor loses to _________.
1. Perfected attached creditor
2. Lien creditor
3. Subsequent BFP w/o knowledge of the unperfected security interest
145
Judicial lien holder prevails over an unperfected security interest in collateral if ____________
The lien creditor becomes a lien creditor before the security interest is perfected
146
A perfected secured party will prevail over the judicial lien holder unless _________.
Future advances
147
A juidicial lien holder will have priority over future advances under a _________ security agreement that was perfected before __________ but was made more than ____________ after the lien.
pre-existing
the judicial alien arose
45 days
148
The future advances privilege for judicial lien holders does not exist if the future advance was:
1. Made w/o knowledge of lien OR
2. Pursuant to a commitment made w/o knowledge of the lien
149
A possessory lien means an interest other than a security interest or an agriculture lien and:
1. Secures payment or performance
2. Created by statute of rule of law AND
3. Effectiveness depends on possession
150
A possessory lien on goods has priority over a security interest in the goods unless the lien is created by ____________.
A statute that expressly provides otherwise
151
A debtor's rights may be transferred to _______.
A third party
152
An agreement between a debtor and secured party which prohibits _________ or makes a transfer _______ does not prevent the transfer from taking place.
A transfer of the debtor's rights in collateral
A default
153
A buyer who purchases the goods in the ordinary course of business from a merchant's inventory will take free of ___________.
Perfected security interests held by the merchant's secured creditors in the inventory
154
What is the good faith requirement of a buyer in the ordinary course's third-party rights?
Buyer must not know that the sale was in violation of the terms of the security agreement
155
A buyer who purchases in the ordinary course only takes free of security interests in the inventory created by _______.
The buyer's seller
156
A buyer of farm products from a farmer will not take free of _________________.
Existing perfected security interests in the farm products
157
The holder/purchase of a negotia ble instrument has priority over any security interests in the negotiable instrument if ________.
They qualify as a holder in due course
158
If a debtor has defaulted on the security agreement, the secured creditor has statutory remedies under _____ and _____.
Article 9
Judicial remedies
159
After default by the debtor, the secured party may notify _____ or ______.
1. An account debtor OR
2. Other person obligated on collateral to make payment/otherwise render performance to/for the benefit of the secured party
160
Self-help for repossessing collateral is permitted if ________.
it can be accomplished w/o a breach of the peace
161
Repossession made over any protest, no matter how mild, constitutes ________.
A breach of the peace
162
If a repossessing creditor breaches the peace then:
1. The creditor loses statutory authorization for self-help repossession AND
2. Debtor may sue the creditor for conversion and recover actual/punitive damages
163
If collateral is located in the debtor's home, the secured creditor needs ________.
Voluntary and contemporaneous consent to enter the debtor's home to engage in self-help repossession
164
A secured creditor may trick a debtor for repossession but may not ____________.
Impersonate a police officer
165
Repossession by judicial action is also known as __________.
writ of replevin
166
What is repossession by judicial action?
A secured creditor may obtain a judicial writ ordering the sheriff to obtain possession of the collateral and deliver it to the secured party
167
A secured creditor who has repossessed the collateral may elect to keep the collateral in full satisfaction of ________.
The outstanding debt
168
To accomplish strict foreclosure, a secured party must _____________.
Send a written proposal to retain the collateral in full satisfaction of the outstanding debt
169
Regarding strict foreclosure, if the collateral is consumer goods, the secured creditor must send notice to _____ or _____.
The debtor
Any secondary obligors
170
Who are secondary obligors?
Those who have guaranteed the debtor's underlying obligation
171
If the collateral is non-consumer goods, the secured creditor must send notice to:
1. The debtor
2. Other secured creditors that have informed the foreclosing secured creditor of their security interest in the collateral
3. Perfected secured creditors
4. Any secondary obligors
172
Any notified party must object to strict foreclosure within _______ after notice is sent.
20 days
173
If any notified party objects to strict foreclosure, what happens?
1. Strict foreclosure is prohibited
2. The collateral must be disposed of by sale
174
If the collateral is consumer goods, there is no strict foreclosure if the debtor has paid _____________ of the ______ or _______.
60%
Cash price
Loan against the consumer good
175
Upon default, what is the sale requirement?
A secured party must:
1. Sell the collateral AND
2. Apply the proceeds to the debt
176
A secured party chooses whether a sale resulting from default will be _____ or _____.
Public
Private
177
Every aspect of a disposition of collateral must be ________ reasonable.
Commercially
178
When is disposition commercially reasonable>
A secured party may dispose of collateral by public/private proceedings according to any time, place, or terms
179
Can a secured party purchase collateral at a public or private disposition?
Only a public one
180
A secured party that disposes of collateral shall send ________ to specified persons.
A reasonable authenticated notification of disposition
181
Regarding sale of consumer goods after default, if the collateral is consumer goods, the secured creditor must send notice to _____ and ______.
The debtor
Any secondary obligors
182
Who are secondary obligors?
Those who have guaranteed the debtor's underlying obligation
183
Regarding sale of consumer goods after default, if the collateral is non-consumer goods, the secured creditor must send notice to:
1. The debtor
2. Other secured creditors that have informed the foreclosing secured creditor of their security interest in the collateral
3. Perfected secured creditors
4. Any secondary obligors
184
Whether notification of sale after default is sent within a reasonable time is a question of ______ and under a standard of _______.
Fact
Commercial reasonableness
185
In a non-consumer transaction, a notification of disposition is sent within a reasonable time if sent:
1. After default AND
2. 10 days or more before the earliest time of disposition set forth in the notification
186
What content must be included in notice of disposition via public sale after default?
Time and place of sale
187
What content must be included in notice of disposition via private sale after default?
Specific time after which sale will be made
188
Under a disposition from default, what are the additional requirements for consumer goods?
1. How any deficiency will be calculated
2. How debtor may redeem the collateral
189
After default, a secured party can proceed against the debtor for a deficiency judgment if ________.
The sale proceeds from the collateral are insufficient to satisfy the debtor's obligations
190
Deficiency following a disposition to a person related to the secured party is calculated based on ________.
The amount of proceeds that would have been realized in a disposition to an independent third party
191
A debtor or any secondary obligor may redeem collateral by _____.
Tendering fulfillment of
1. All obligations secured by the collateral AND
2. The reasonable expenses incurred by the secured party, including attorney's fees
192
After default, a debtor or secondary obligor may redeem collateral at any time before ________.
A secured party has:
1. Sold the collateral OR
2. Completed a strict foreclosure
193
After default, a debtor or secondary obligor may redeem collateral, but if the security agreement has an acceleration clause, then _______.
The debtor must pay the entire accelerated amount to redeem the collateral
