Secured Transactions

Question 1

General Info

Answer 1

• creditor and debtor agreement
• attachment: creditor’s rights against the debtor
• perfection: creditor’s rights against the 3rd parties

What is required:
- Contract ($500 Sale of Goods)
- Note-Balance Due
- Security Agreement - Attachment
- Financing Statement - Perfection when filed, not when signed

Question 2

Attachment

Answer 2

creditor’s rights against the debtor
- Security Agreement

• Debtor must have rights in the collateral for attachment to take place

– Debtor has rights in the collateral
– Secured party has given the debtor value (credit/loan)
– Written Agreement signed by debtor giving creditor security interest in collateral
- non-possessory

To attach:
- debtor must have rights in collateral
- secured party must give value to the debtor
- there must be a security agreement signed

Question 3

Perfection

Answer 3

creditor’s rights against the 3rd parties

Financing Statement
- constructive notice of a financing agreement between the parties (have a lien)
- FILE

• Name and address of debtor and creditor
• Description of collateral
• Authorized (rather than signed) by debtor
• Filed in appropriate government office

upon filing:
- 5 years
- renewal if more
- termination if released
- if collateral is moved, must refile (4 mo grace period)

Question 4

Possessory Interest

Answer 4

Attachment and Perfection occur simultaneously upon possession of collateral

Question 5

Types of Collateral

Answer 5

Consumer Goods: personal or household use
Inventory Goods: purchased for resale
Equipment: purchased for use in business

Priority
- if inventory: first creditor to file statement is winner
- non-inventory: 1st to attach (20 day grace period from attachment)

Question 6

Default/Repossession

Answer 6

Default - any breach of agreement (failure to pay)

Secured Party’s rights
- Judgement: sue debtor for debt due
- Repossession: self-help remedy not requiring judicial involvement, but cannot breach the peace (cannot go into debtors garage)

Sale procedure:
- Notice before the Sale
- Commercially reasonable
- Redemption: debtor has right to pay obligation in full prior to sale
- Surplus - goes back to debtor
- Debtor responsible for deficiency

• If consumer paid 60% or more of purchase price, retention by the creditor is not allowed. Must be sold within 90 days or be liable for damages