15 CREATION OF SECURITY INTERESTS - Formalities for Attachment Flashcards

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1
Q

What is the significance of attachment where a secured creditor has a security interest attached to the collateral but has not perfected?

A

The secured creditor has:

  • Rights in the collateral enforceable against the debtor, but NOT against 3Ps;
  • Right to self-help repossessions as long as they don’t breach the peace.
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2
Q

What happens when a secured creditor has a security interest attached to the collateral but has not perfected
and a competing creditor is also enforcing their rights against the debtor?

A

The secured creditor who has attached but not perfected loses (does not have priority over) to:

  • Bankruptcy trustee (assuming can’t perfect);
  • Competing A9 secured creditor who files a financing statement before our secured creditor
  • Unsecured creditors who get the sheriff to levy before perfection (generally)
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3
Q

What are the two (broad) requirements for perfection?

A

1) Attachment; &

2) Public Notice

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4
Q

How does the secured creditor give public notice?

A

Generally, public notice is accomplished by filing a financing statement in the state’s Art. 9 office.

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5
Q

What are the two views on the situation where the collateral description is missing from a signed security agreement?

A
  • View One: Completion of the collateral description after the signing is ineffective
  • View Two: Post-signing completion of collateral description is effective—attachment and perfection occurs at that point
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6
Q

What about if collateral description is missing then debtor files for bankruptcy?

A

At that point the collateral description cannot be filled in because it would be an act to perfect, which is in violation of the automatic stay.

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7
Q

What are the three requirements for Attachment under §9-203(b).

A

Value Given;
Rights in Collateral; &
S.I. Formalities:

  1. ) Value is given by the creditor to [or oh behalf of] the debtor;
  2. ) Debtor [or other] has rights in the collateral; AND
  3. ) The debtor grants a Security Interest which meets all the formalities/requirements.
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8
Q

What are the formalities/requirements for the debtor to grant the secured creditor an enforceable security interest?

A

There is a security agreement meeting the following requirements:

  1. ) Signed or authenticated by the debtor;
  2. ) Contains a description of the collateral; and
  3. ) Granting language.

OR ALTERNATIVELY:
• Composite Document Rule: Multiple documents related to the transaction can satisfy this element by collectively meeting the requirements of a security agreement.

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9
Q

What generally will and won’t work when determining whether the Composite Document Rule is met?

A

When granting language within the composite documents commit the parties:

Financing statements DO NOT work for granting language—don’t commit the parties to anything.

Signed promissory note, and signed financing statement—CAN work, promissory note suggests a granting

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10
Q

To create an enforceable security interest, what type of property must the collateral be?

A

Personal property or fixtures.

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11
Q

What is a sufficient collateral description?

A

Collateral description is sufficient if it “reasonably identifies what is described.”

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12
Q

What date, or when, does the interest in after acquired property clause in an otherwise enforceable security agreement apply to?

A

Date signed.

“After” is intended to mean any time after the debtor executes, or otherwise authenticates, the security agreement.

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13
Q

When are oral security agreements enforceable?

A

When the creditor takes possession of the collateral 9-203(b)(3)(B).

(or when SC takes delivery of a certificated security under clause C)

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