4. Priority Flashcards
Attached Unperfected Creditor:
This is the Article 9 creditor who creates an enforceable security interest, i.e., it attaches, but either never bothers to perfect or tries to perfect but botches the effort, perhaps by filing in the wrong place.
Lien creditor:
This is the general unsecured creditor who goes to court to get a judicial lien on the collateral.
Perfected Attached Creditor:
This is the Article 9 creditor who succeeds in attaining perfection.
Non-Ordinary Course Buyer:
This is someone who purchases the collateral outside the ordinary stream of commerce.
(For example, Steven Tyler buys a guitar from his auto mechanic.)
Buyer in Ordinary Course:
This is someone who purchases the collateral from a merchant’s inventory.
(For example, Steven Tyler buys a guitar from Sam Ash Guitar Store.)
General Unsecured Creditor:
This is the lender who never bothered to take
collateral.
(For example, Jared lends the Subway Sandwich Co. $50,000, and, believing it to be a good credit risk, takes no collateral to back up his extension of value.)
How all of the different characters typically ranks:
- Buyer in Ordinary Course
- Perfected Attached Creditor
- Lien creditor
- Non-Ordinary Course Buyer
- Attached Unperfected Creditor
- General Unsecured Creditor
PAC vs. PAC:
The Rule: First in time, first in right.
What is an after-acquired collateral financier (AACF)?
A secured creditor who takes as collateral a security interest “in all of Debtor’s [business equipment, for example, or inventory, for example], whether now held or hereafter acquired.”
What is a purchase-money security interest (PMSI)?
A security interest that enables the debtor to purchase the goods. In other words, it is an extension of value by a lender who takes as collateral a security interest in the very item that its loan enables the debtor to acquire.
PAC vs. BIOC:
General rule: PAC loses to BIOC. A buyer in the ordinary course of business takes free of a perfected security interest in seller’s inventory.
