Secured Transactions (UCC Art 9) Flashcards Preview

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Flashcards in Secured Transactions (UCC Art 9) Deck (13)
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1
Q

What are the 2 key ways to get a Purchase Money Security Interest (PMSI)?

A
  1. Collateral sale: creditor sells goods to debtor (e.g. an appliance) and retains a PMSI in the goods themselves to secure the debt
  2. Loan to acquire specific collateral: E.g. bank loans debtor money to acquire something specific e.g. a car – bank has a PMSI in the car
2
Q

What is “Attachment”?

A

Attachment establishes the creditor’s rights against the debtor and is necessary for the secured party to repossess the collateral or related proceeds from the debtor.

3
Q

What is required for attachment to occur?

A

The creditor must have (1) a security interest, (2) the debtor has rights in the collateral, and (3) the creditor gives value

4
Q

What are the five methods to reach “perfection?”

A
  1. Attachment + possession
  2. Attachment + control
  3. Attachment + filing
  4. Mere attachment + PMSI in consumer goods
  5. Attachment + title certificate
5
Q

There are four types of tangible goods that qualify as collateral - what are they?

A

i. Inventory
ii. Equipment
iii. Consumer goods
iv. Farming products

6
Q

What is the boilerplate FIRST thing you should say introducing a UCC 9 essay?

A

UCC Article 9 controls a creditor’s security interest in a debtor’s collateral. Creditors can reduce their monetary risk if a debtor defaults on repayment by the designation of specific collateral to satisfy the obligation.

7
Q

If there is a question as to what type of use the collateral is used for, what controls?

A

Whatever the primary use in the debtor’s hands is

8
Q

What is required in a security agreement?

A

a. Written or authenticated record
b. Debtor must sign/agree
c. Creditor need not sign
d. Collateral described in reasonable detail

9
Q

What are a security agreement “proceeds?”

A

The proceeds are whatever is received by the debtor upon the sale/exchange or disposition of primary collateral.

10
Q

What is the result of an “after-acquired property” clause in a security agreement?

A

Future, “after-acquired” collateral the debtor may acquire/manufacture – this creditor gets a security interest in it

  1. May create conflict w/creditor who finances that after-acquired piece of collateral
  2. “After-acquired property interest” < the PMSI interest in the new collateral
11
Q

What is the effect of a “future advances” clause in a security agreement?

A
  1. Further cash advances may be secured by the collateral – security interest is automatic
  2. Ex: bank gives a new loan under existing collateral, old collateral counts as security for the new loan
12
Q

What are the logistics of filing in order to “perfect” a security interest?

A

a. What do you file?
i. “Financial statement” that sufficiently describes collateral covered
b. Where do you file it?
i. In the location of the debtor’s state/agency
c. What/why do you file it?
i. Filing provides notice to al other creditors and is affective at the time of filing
d. When do you file it?
i. Perfection is effective on the date of filing, but a PMSI gets a 20-day grace period (for non-inventory collateral) in which to file

13
Q

What is different about filing a financial statement for a PMSI? What is the exception to that difference?

A

A PMSI gets a 20-day grace period to file and perfect. However, this does not apply to inventory.

ii. For inventory – notice required and no grace period:
1. If another secured party previously filed, new PMSI must sent a notification to the other person (who likely has an “after-acquired” inventory interest). Plus, no 20-day grace period.