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Flashcards in Secured Transactions Deck (260)
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1

When dealing with purchasers of chattle papers, what does "new value" mean?

“New value” means that the purchaser must give new consideration, such as cash or credit, to the transferor. Therefore, parties who take the chattel paper as payment for a debt, or as proceeds of other collateral, are excluded.

2

What is the priority between a security interest in fixtures versus a real property interest?

Generally, a security interest in fixtures is subordinate to a conflicting interest of an encumbrancer or owner of the related real property other than the debtor. However, a security interest in fixtures has priority over an interest in the real property with which the fixtures are associated if the security interest in fixtures is perfected by a fixture filing before the real property interest is recorded.

3

What is "acceptance of collateral"?

In lieu of disposing of the collateral, the secured party may usually accept the collateral in full or partial satisfaction of the obligation secured by the collateral.

4

What is the treatment of a disposition deficiency?

If, after the required payments and applications of proceeds have been made, there is a deficiency, then the obligor generally is liable for the deficiency.

5

What procedure should be followed if a debtor changes his, her, or its legal name?

If the debtor changes its name and the filed financing statement consequently becomes seriously misleading, then the secured party has four months in which to file an amendment to the financing statement reflecting the new name. Should the secured party fail to act within this four-month window, collateral acquired by the debtor after the four-month period is not covered by the financing statement. If a new debtor becomes bound by a security agreement, and the difference between the name of the original debtor and the name of the new debtor causes the financing statement to be seriously misleading, then the secured party has a similar four-month window in which to act.

6

What is the time limitation to redeem collateral used to satisfy their secured debt?

Redemption cannot occur if the secured party has disposed of the collateral or entered into a contract for its disposition, accepted the collateral in full or partial satisfaction of the obligation secured by the collateral, or collected on the collateral.

7

What is the special rule regarding PMSI in fixtures?

A PMSI in fixtures has priority over a prior interest in the real property with which the fixtures are associated when: i) The debtor has an interest of record in the real property (e.g., is an owner) or is in possession of the real property (e.g., is a lessee); and ii) The security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.

8

What priority is a PMSI in goods other than inventory or livestock given?

A PMSI in goods other than inventory or livestock prevails over all other security interests in the collateral, even if they were previously perfected, if the secured party perfects before or within 20 days after the debtor receives possession of the collateral.

9

In a consumer transaction, may a secured party accept collateral for full or partial satisfaction?

In a consumer transaction, a secured party can accept the collateral only in full satisfaction of the obligation; an acceptance in partial satisfaction of the obligation is not allowed. Any attempted acceptance in partial satisfaction is void.

10

May a person amend a financing statement?

A person may amend a financing statement, such as by adding or deleting collateral covered by the statement. The amendment is generally effective as to the added item only from the date of the amendment. An amendment does not extend the period of effectiveness of the financing statement.

11

Under Georgia law, what is an oral objections affect on the "breach of the peace"?

The unequivocal oral protest of a defaulting debtor is a sufficient objection to render subsequent seizure an unlawful breach of the peace.

12

What is the effect of after-acquired property and future advances on financing statement collateral?

A financing statement may be effective to cover after-acquired property if such property falls within the collateral described, whether after-acquired property is mentioned as such in the financing statement or even contemplated by the parties at the time that the financing statement was authorized. Similar treatment is accorded to future advances.

13

What is the right to use or operate collateral?

The secured party may use or operate collateral for the purpose of preserving the collateral or its value. In addition, use or operation with respect to collateral that is not consumer goods may be in the manner and to the extent agreed to by the debtor.

14

What is the effect of an account debtor?

Upon receipt of notification, the account debtor may discharge her obligation only by paying the assignee; a payment made to the assignor does not discharge the account debtor’s obligation. Against the assignee, the account debtor may raise, unless waived, claims and defenses that arise from the transaction with the assignor who created the account, even those that accrue after the account debtor is notified of the assignment.

15

How are proceeds in fixtures handled?

Generally, the basic rules (e.g., first-to-file-or-perfect) govern priority if there are conflicting security interests and at least one of those interests is claimed as proceeds. Moreover, the filing or perfection date for the original collateral is treated as the filing or perfection date for the proceeds. UCC § 9-322(b)(1). This rule controls, even when the security interest in inventory is a PMSI, because the super-priority of a PMSI in inventory does not extend to proceeds that are not cash.

16

Who is entitled to file a financing statement?

Although the secured party or a representative of the secured party usually files the financing statement, any person may do so. The signature of the filing party is not required.

17

Under Georgia law, what does the PMSIs in livestock "notification" requirement require?

Notification is required only when the previously perfected security interest has been perfected by filing. When the PMSI is in livestock, the notification that must be sent to the holder of any conflicting security interests is effective only for six months

18

What is the general rules regarding what transactions follow Article 9 processes?

Article 9 governs a transaction that creates, by agreement, a security interest in personal property or a fixture. In addition, a lease, consignment, agricultural lien, and even a purchase of personal property may be subject to Article 9. Also, a real-property transaction can produce an obligation, such as the promissory note secured by a mortgage, that can be the subject of an Article 9 security interest.

19

What is the treatment of a disposition surplus?

If, after the required payments and applications of proceeds have been made, there is a surplus, the secured party generally must pay the surplus to the debtor.

20

What are "chattel paper"?

“Chattel paper” consists of one or more records that evidence both (i) a monetary obligation (e.g., a negotiable note) and (ii) a security interest in specific goods (e.g., a security agreement) or a lease of specific goods.

21

Generally, when does a security interest "attach"?

For the security interest to be enforceable against the debtor, three conditions must coexist: i) Value has been given by the secured party; ii) The debtor has rights in the collateral; and iii) The debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security agreement.

22

What is the only manner that deposit accounts or letter-of-credit rights may be perfected?

By control.

23

What additional information must a notice for a consumer goods transaction include?

In addition to the above requirements for a non-consumer goods transaction, proper notice in a consumer goods transaction must also include: i) A description of any liability for a deficiency of the person to whom the notification is sent; ii) The telephone number from which the redemption amount is available; and iii) The telephone number or mailing address from which additional information concerning the disposition and secured obligation is available.

24

What is a security interest general an interest in?

A security interest is generally an interest in personal property or fixtures that secures payment or performance of an obligation.

25

Who is entitled to notice?

Notification of disposition is required to be sent to (i) the debtor, (ii) any secondary obligor, and, in the case of non-consumer goods, (iii) any other secured party or lien holder who held a security interest that was perfected by filing or pursuant to a statute, and (iv) any other party from whom the secured party has received authenticated notice of a claim or interest in the collateral.

26

What is the limitation on taking possession of collateral under default?

A secured party is required to use judicial process (e.g., a replevin action) to obtain possession of the collateral unless possession can be obtained without breach of the peace.

27

What is the treatment of sales of accounts, chattel paper, payment intangibles, or promissory notes?

When the underlying transaction is the sale of accounts, chattel paper, payment intangibles, or promissory notes, then the debtor is not entitled to any surplus, and the obligor is not liable for any deficiency.

28

What is the effect of a low disposition price?

A low price may trigger careful scrutiny by the court of the disposition and its reasonableness.

29

What is the "safe harbor" rule regarding debtor identification on financing statements?

Under the “safe harbor” rule, adopted by only a few jurisdictions, the financing statement may include the debtor’s “individual name” (which the UCC does not define), the name on the debtor’s driver’s license, or the debtor’s surname and first personal name.

30

What is the effect of an error in the secured party's name on a financing statement?

An error in the name of the secured party on a financing statement is usually not seriously misleading and does not affect the perfection of the security interest because the filing system is not geared to a search based on the secured party’s name. Nevertheless, the secured party who files a financing statement with such an error may be subject to estoppel in favor of a holder of a conflicting claim in the collateral.