#16 - Personal Property Filing System

Question 1

What is the Art 9 Filing System?

Answer 1

A filing system is a place/data repository where creditors file notices to other creditors (called financing statements) informing the searching creditors that they have claimed a security interest in a specific debtor’s property. They are used to establish priority between creditors.

It’s not just one filing system, it’s a bunch of state-specific filing systems.

The fundamental problem that filing systems handle is secret liens. We needed a system that would broadcast to 3rd persons that someone has a security interest in something that is not possessed by the secured creditor. Conceptually, the locations a creditor can do this search in the real estate world are on a county-by-county basis, but in the Art 9 world, it’s at a state level/jurisdiction level.

Question 2

Perfection and Priority

Answer 2

Perfection: 9-308 = some act, which varies for different types of collateral, that is legally deemed sufficient to give the world notice of that party’s interest in the collateral

Method of perfection (depends on type of collateral): filing, possession, control, automatic perfection, levy

Priority = Legal conclusion that a particular claim to a piece of collateral is “better” than another claim. That is, one party can claim value in the collateral before another party. Priority is an attribute of a specific lien against some property.

General rule: first to attach AND perfect a security interest has priority

Question 3

Basket Time

Answer 3

this is a problem when something has been filed with a gov Art 9 office but hasn’t been indexed yet in the system, and this is called basket time. Sometimes it can take weeks. It is effective from moment filed, not the moment its visible in the index

Question 4

Most Relevant Art 9 Provisions

Answer 4

9-109(a) = Art 9 applies to a transaction that creates a sec int in personalty or fixtures by K

9-310(a) = except as otherwise provided in subsection b (possession, control, automatic perfection)… a financing statement must be filed to perfect a security interest

9-310(b)(3) = financing statement is not necessary to perfect a security interest… in property subject to a statute, reg, or treaty described in 9-311a

9-311a = filing of a financing statement is not necessary or effective to perfect a security interest in property subject to: other statutes, namely for vehicles operating under a separate Certificate of Title system, where you would have to file in those systems instead

Question 5

Why should you always “file” even if the security agreement has yet to attach?

Answer 5

Priority via perfection reverts to the date of filing and you can file before the security interest attaches to the collateral. SEE 9-502(d)