3. Perfection of Security Interests

Question 1

What is publication?

Answer 1

It is something that the secured party does to put the world on record or constructive notice of the secured party’s existence.

Question 2

Three ways to attain perfection:

Answer 2

1. By the secured party’s taking possession of the collateral
2. Automatic perfection for purchase money security interests (PMSIs) in consumer goods
3. The most common route to perfection: the secured party files notice of the security interest in the public records: Proper filing puts the world of potentially competing creditors on record or constructive notice of the filer’s claim.

Question 3

What is a purchase money security interest (PMSI)?

Answer 3

It is a security interest that enables the debtor to purchase the goods.

Question 4

What is filed to put the world on notice?

Answer 4

The security agreement could be filed, but rarely is. Instead, the document typically filed is called a financing statement.

Question 5

What is a financing agreement?

Answer 5

It is a very simple document whose only purpose is to provide interested parties with sufficient information to make follow-up inquires.

Question 6

What are the requisite contents of a financing statement?

Answer 6

1. Debtor’s name and address
2. Creditor’s name and address
3. A description of the collateral

Question 7

Where is the financing statement filed?

Answer 7

Filing is done centrally, with the state Secretary of State, in the state where debtor is located.

Question 8

If debtor is an individual, he or she is located:

Answer 8

In the state of principle residence

Question 9

If debtor is a registered organization (i.e., a corporation, a limited liability company or a limited partnership), it is located:

Answer 9

In the state under whose laws it is organized