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Question 1

What is a secured transaction?

Answer 1

A transaction intended to create a secure interest in property.

Question 2

What body of law governs secure transactions?

Answer 2

Article 9 of the UCC

Question 3

Define “collateral”

Answer 3

Property subject to the security interest.

Question 4

Define “Attachment”

Answer 4

Term used when a valid security interest is created

Question 5

What are the 3 methods of attachment?

Answer 5

Security agreement

Possession

Control

Question 6

What are the 3 requirements of a valid security agreement

Answer 6

1. Agreement is in writing (Authentication with debtors signature, intent to enter agreement, adequately describes collateral)
2. Creditor gives something of value
3. Debtor gives collateral that he has actual ownership of or legal rights to in return

Question 7

Possession (Attachment)

Answer 7

If creditor receives possession of the collateral, a secure transaction is presumed

Question 8

Control (Attachment)

Answer 8

If creditor received control of the collateral, a secure transaction is presumed.

Question 9

What is perfection?

Answer 9

Putting the world and all 3rd parties on notice of a security interest.

Question 10

What are the ways a security interest can be perfected?

Answer 10

1. Financing statement
2. Possession
3. Control
4. PMSI of consumer goods

Question 11

What are the requirements for a valid financing statement?

Answer 11

Must be filed with the state and name the debtor, creditor, and collateral

*Minor errors are ok as long not seriously misleading

Question 12

How to “perfect” a security interest in a car?

Answer 12

Notation on title

Question 13

How to perfect a security interest in land?

Answer 13

Need a filing statement describing the land and must be filed in state where land is located

Question 14

What are consumer goods?

Answer 14

Goods bought for personal or household purposes.

Question 15

What are inventory goods?

Answer 15

Goods that are quickly sold or leased by a business.

Question 16

What is equipment?

Answer 16

The “catch all” category of physical goods if doesn’t fall under consumer, inventory, or farm goods. (Think “business” supplies)

Question 17

What are farm goods?

Answer 17

Goods such as livestock, supplies, crops, produced in farming operation in manufactured state. Debtor must be engaged in farming.

Question 18

Priority: Perfected v. Unperfected SI?

Answer 18

Perfect wins

Question 19

Priority: Perfected v. Perfected?

Answer 19

1st to perfect or file financing statement

Question 20

Priority: PMSI v. Non PMSI?

Answer 20

PMSI wins

Question 21

Security Agreement and Proceeds

Answer 21

SI automatically gives rights to proceeds

Question 22

Proceeds and Perfection

Answer 22

1. If creditor perfected collateral, proceeds also automatically perfected it within 20 days
2. To remain perfected (after the 20 days) the creditor must perfect UNLESS:

*identifiable cash proceeds ($, check, account)

OR

*Proceeds of the same type (eg. “equipment” for “equipment”)

Question 23

What are the creditor’s options if the debtor defaults?

Answer 23

Demand payment or use self help

Question 24

How does a creditor properly use self help in case if a default?

Answer 24

• Repossess collateral peacefully
• Sell in reasonable manner
• Use proceeds to pay debt

Question 25

What factors are used to determine if “peace” is breached when self help is used?

Answer 25

(1) If repossession was on debtors property

(2) Whether the debtor objected

(3) If repossession was done by trickery

Question 26

Does the creditor have to give the debtor notice of repossession?

Answer 26

No.

Question 27

Came a creditor break into a debtors home to repossess?

Answer 27

No.

Question 28

Secured Party vs. Buyer

Answer 28

Generally, the secured party wins unless special type of buyer:

1. Authorized Sale
2. BIOCB
3. Garage Sale exception

Question 29

Authorized Sale

Answer 29

A buyer takes the collateral free of the SI if the creditor was aware of the sale (explicitly or implicitly) and did nothing to protect his SI

*Doesn’t matter if buyer knew about SI (buyers knowledge doesn’t matter)

Question 30

BIOCB

Answer 30

Take free from SI if:

1. Collateral is goods
2. Sale made in ordinary course if seller’s business
3. Buyer doesn’t know about SI

Question 31

Garage Sale Exception

Answer 31

Buyer takes free of SI if:

1. Value given
2. Doesn’t know about SI
3. For personal or household use
4. Before financing statement filed