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Flashcards in Secured Transactions Deck (41)
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1
Q

Inventory PMSI

A

Filing must be made prior to debtor receiving possession, and secured party must notify all conflicting security interests prior to debtor receiving possession

2
Q

Lender’s PMSI

A

Secured party gives value to the debtor to enable the debtor to acquire rights in the goods/software, and the value was so used.

3
Q

Garage Sale Rule

A

A buyer of consumer goods for value, for his own personal, family, or household use from a consumer seller and without knowledge of the security interest buys free and clear of a perfected security interest unless a financing statement has been filed.

4
Q

Buyer vs. perfected

A

Takes free and clear of a perfected security interest created by the seller if:

1) Buys goods, not including farm products
2) From a merchant in the business of selling goods of that kind
3) in good faith and
4) w/o actual knowledge that the sale violates the rights of another in those goods.

5
Q

Bankruptcy Effect on Collateral

A

Under the bankruptcy code, the trustee may avoid any transfer of property of the debtor if the trustee can establish all of the following:

(i) the pre-bankruptcy transfer was to or for the benefit of a creditor;
(ii) the transfer was made on account of an antecedent debt;
(iii) the debtor was insolvent at the time of the transfer; (iv) the transfer was made within 90 days of the filing of the bankruptcy petition; and
(v) the transfer has the effect of increasing the amount that a transferee would receive in a Chapter 7 case.

-Exception when the transfer is intended as a contemporaneous exchange for new value.

6
Q

Enforceable Security Agreement

A

1) Record
2) Describes Collateral
3) Authenticated by debtor (including by way of an email moniker)

7
Q

After-Acquired Clause

A

Required for security interest to attach on collateral purchased by debtor, other than inventory, after entry into the security agreement. Inventory is automatic.

Proceeds (broadly defined) are also automatically covered.

8
Q

Indefinite Automatic Perfection

A

PMSI in consumer goods

9
Q

Additional information required for real property-related collateral

A

1) Indication that this collateral is covered
2) Indication that it is to be filed in the real property records
3) Description of the real property
4) Name of a record owner if the debtor does not have an interest of record

10
Q

Changed Legal Name

A

4 months to correct, or property purchase after the 4-month period won’t be covered.

11
Q

Consignments treated as a purchase-money security interest in consigned inventory

A

1) Delivered to a merchant who deals in goods of that kind for the merchant to sell
2) Merchant not known by its creditors to be substantially engaged in selling goods for others
3) Value of the goods in excess of $1,000
4) Goods were not treated as consumer goods immediately prior to delivery

12
Q

Temporary Automatic Perfection

A

1) Perfected collateral is given to debtor for resale (lasts for 20 days)
2) Debtor or collateral moves to another state (lasts for 4 months)
3) Collateral is exchanged or gives rise to proceeds (lasts for 20 days, but indefinite for identifiable cash proceeds)

13
Q

Seller’s PMSI

A

Secured party sells the goods to the debtor and the debtor incurs an obligation to pay the secured party all or part of the purchase price.

14
Q

Buyer vs. unperfected

A

Buyer takes free and clear if:

1) Buyer gives value
2) receives collateral and
3) buys without knowledge of the interest

15
Q

Same-office rule

A

Proceeds that are not cash are perfected indefinitely if:

1) Filed financing statement covers the original collateral;
2) Proceeds are collateral in which a security interest may be perfected by filing in the same office;
3) Proceeds are not acquired with cash proceeds

16
Q

Advances

A

If done within 45 days, covered by the attachment of the security agreement. Covered thereafter if the advance is made without knowledge

17
Q

Collateral that can be perfected with possession

A

1) Goods
2) Instruments
3) Negotiable Instruments
4) Tangible Chattel Paper

18
Q

Attachment requirements

A

1) Value has been given
2) Debtor has rights in the collateral
3) Debtor has authenticated a security agreement with a description of the collateral OR the secured party has possession or control pursuant to the security agreement

Security interest “attaches” in after-acquired property when the property is acquired, not when the interest was initially given.

19
Q

Self-Help

A

Cannot breach the peace.

20
Q

Unperfected vs. Unperfected

A

Priority determined by first to attach

21
Q

Priority of unperfected secured vs. judicial lien creditor

A

Judicial lien has priority. If judicial lien acquired after attachment, the creditor must not have knowledge of the security interest at the time the lien attaches.

22
Q

Consequences of non-compliance of secured parties in disposing of collateral

A
  • Statutory minimum for consumer goods of the credit service charge, plus 10% of the principal amount, plus 10% of the cash price.
  • Rebuttable presumption that the secured party is not entitled to collect deficiencies; absolute bar in consumer transactions.
23
Q

Standard for commercially reasonable disposition

A
  • Sold in the usual manner on a recognized market
  • At the price current in any recognized market at the time of the disposition; or
  • otherwise in conformity with reasonable commercial practice among dealers of that type of property

Must provide timely notice to debtor, other secured parties and any other stakeholder the secured party has received notice of a claim from.

24
Q

Kinds of Intangibles

A
  • Accounts Receivable
  • Deposit Accounts
  • Commercial tort claims
  • General intangibles (including IP)
25
Q

Perfection Requirements

A
  • Filing a financing statement (sufficient for all collateral except for deposit accounts, money and letter-of-credit rights)
  • Possession of the collateral
  • Control over the collateral
  • Automatic (temporary or permanent)
26
Q

Purchase Money Secured Interests

A

Only applies to goods and software but receives special priority status.

Must be filed within 20 days of debtor receiving possession of the collatera.

27
Q

Debtor

A

A person who has an interest, other than a security interest or lien, in the collateral.

28
Q

PMSI of equipment/fixtures

A

Must be filed within 20 days of the debtor receiving the goods or them becoming fixtures.

29
Q

Accessions

A

Goods united with others but their identity is not lost.

Security interest is not lost.

30
Q

Financing Statement Requirements

A

1) Name of Debtor (No trade name)
2) Name of Secured Party
3) Description of the collateral (cannot be overly generic)
4) Address (errors will not destroy effectiveness)
5) Whether debtor is an individual or organization (errors will not destroy effectiveness)

Filing must be authorized, which could be done pursuant to the security agreement itself.

31
Q

PMSI vs. judicial lien

A

If the secured party has a PMSI that perfects within 20 days after the debtor receives the collateral, the perfection will revert back to the date the debtor receives collateral.

32
Q

Kinds of Quasi-Intangibles

A
  • Document of title
  • Negotiable Instruments
  • Non-negotiable instruments, such as an IOU
  • Investment Property (Securities)
  • Chattel Paper
33
Q

Commingled Goods

A

Goods united in such a way that their identity is lost in a product or mass.

Security interest now attaches to the product or mass.

34
Q

Collateral perfected by control

A

1) Deposit Accounts (exclusively)
2) Investment Property
3) Electronic documents or electronic chattel paper
4) Letter-of-credit rights (exclusively)

35
Q

Dual-status PMSI

A

Only for a non-consumer transaction, won’t lose its value because it:

  • also secures another obligation;
  • the underlying obligation is also secured by other non-PMSI collateral or
  • the underlying obligation has been renewed, refinanced or restructured
36
Q

Factors for a lease that is a “disguised sale”

A

1) Original term is equal to or greater than the remaining economic life of the goods;
2) Lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become owner of the goods.
3) Lessee has an option to renew the lease for the remaining economic life at no or nominal additional consideration.
4) Lessee has an option to become the owner at no or nominal additional consideration.

37
Q

“Goods”

A

Anything that is moveable at the time that a security interest attaches.

38
Q

PMSI vs. PMSI

A

First to file, but Seller’s PMSI > Lender’s PMSI.

39
Q

Satisfaction

A

May accept the collateral as full satisfaction if the debtor consents or does not object within 20 days, or in partial satisfaction if the debtor consents.

Must also send notice to other secured parties and stakeholders.

40
Q

Classes of Goods

A

1) Consumer Goods (acquired primarily for personal, family, or household purposes)
2) Farm Products (Goods that are crops or livestock and include supplies used or produced in farming)
3) Inventory (Goods, other than FP, held for sale or lease, held under a service contract, or consist of raw materials, work in progress or materials used or consumed in a business)
4) Equipment (Everything else)

41
Q

Perfected vs. judicial lien

A

Perfected has priority.