4 step Flashcards
Step 1
Is there a valid security agreement?
1. Secured party takes control of collateral or
2. Debtor signs security agreement describing collateral
Step 2
Did creditor attach his interest on collateral?
1) Creditor gives VALUE
2) Debtor has CONTRACT (reasonably identifiable signed sec agreement)
3) Debtor has RIGHTS in collateral (ownership)
Step 3
Did the creditor perfect?
1) Filing detailed financing statement authorized by debtor with SOS (in place of debtor);
2) Sec party takes possession or control of collateral;
3) Automatic Perfection for PMSI (sec interest that lets debtor buyconsumer goods)
STEP 4
Determine Priority:
when in doubt, first in time, first in right
1) BIOC who didn’t know about sec interest
2) PMSI has superpriority
3) Perfected sec interests, party that files or perfects first has priorty
4) Unperfected sec interests, first to attach has priority
5) Debtor
How can you get collateral back in your possession after default?
- Already have it in your possession
- Seek Repossession (permissible if debtor doesn’t breach peace)
- Judicial repossession (initiate judicial action to get judgement or writ ordering sherif to help)
How to get paid?
- Strict foreclosure
( if you don’t want to or can’t) - Sell collateral at Public/Private Sale
Security interest in crops
A perfected sec interest in crops has priority over a conflicting interest in real property where crops are growing, regardless of time of filing or perfection.
Security interest in fixtures
First party to file fixture filling or record its real property interest prevails.
Accessions
Goods physically united with other goods in such a way that the identity of the original goods is not lost, such as memory installed in a computer, or tires installed on a car.
A security interest created in collateral that
becomes an accession isn’t lost due to collateral becoming an accession.
Strict Foreclosure
When sec party retains collateral in full satisfaction of debt.
Priority of Proceeds
First‐to‐file‐or‐perfect governs priority of proceeds.
The filing or perfection date for the original collateral is treated as the filing or perfection date for the
proceeds.
PMSI vs PMSI
First‐to‐file‐or‐perfect
Judicial Lien creditor
Creditor who acquires a lien on the collateral
by a judicial process, rather than by law.
A perfected security interest has priority
over a judicial lien creditor, BUT judicial lien creditor has priority over an unperfected
security interest.
Disposition of Collateral
After default, a secured party may sell, lease, license, or otherwise dispose of all or any of the collateral. Give notice!
For public/private sale, every aspect must be commerically reaonsable.
After-acquired Property clause
Sec Agreement may create a Collateral interest in property to be acquired in future. Secured interest will attach to property once debtor acquires interest in collateral.
