7.6 - Secured Transaction Flashcards
A limited right in specific personal property of he debtor that allows the creditor to take the property (commonly referred to as repossessing) if the debtor fails to fulfill the creditor obligation:
Security interest
Applies to most contractual security interest in personal property or fixtures and outright sales of accounts receivable.
Article 9 of the Uniform Commercial Code (UCC)
Article 9 does not apply to:
Security interest in land, wage claims, and statutory liens such as mechanics liens.
A type of security interest that has priority over all other types of security interests in the same collateral if it is properly perfected:
Purchase Mooney security interest (PMSI)
A PMSI arises when:
A creditor sells the collateral to the debtor on credit, retaining a security interest for the purchase price
OR
The creditor advances funds used by the debtor to purchase the collateral
The property subject to a security interest:
Collateral
What are the 4 broad categories of collateral?
Goods
Intangibles & semi-intangibles
Investment property
Proceeds
The goods category of collateral include:
Consumer goods
Inventory
Equipment
The intangible collateral account includes:
Any right to payment for goods, services, real property, or use of a Reddit card not evidenced by an instrument or chattel paper
The investment property category of collateral includes:
Stocks
Bonds
Mutual funds
The proceeds category of collateral includes:
Whatever is received upon the sale, exchange, collection or other disposition
Established the right of a creditor in collateral vis-a-vis the debtor:
Attachment
To acquire the maximum priority in the collateral over other parties who may have an interest in the collateral, the secured party must:
Perfect
The five methods of perfection include:
- Filing
- Taking possession of the collateral
- Control
- Automatic perfection
- Temporary perfection
Under the method of perfection by filing, what documents are required?
Filing of a financing statement that give the names and addresses of the debtor and creditor and an indication of the type of collateral covered by the financing statement
The method of perfection by taking possession is available for what type of collateral and what’s an example of this?
For tangible only
Similar to when a pawn shop takes an item in exchange for a loan of money
Under the method of automatic perfection, a security interest can be perfected simply by:
The attachment of the security interest th out any added requirements
The only type of PMSI that is automatically perfected is:
A PMSI in consumer goods
Are small-scale assignment of accounts (such as a few accounts receivable) automatically perfected?
Yes
If a creditor has a perfected security interest in collateral an that collateral is sold, the creditor has:
Temporary perfected security interest in the proceeds of the collateral sold
How long does temporary perfection last?
20 days
If a debtor moves from one state to another, perfection in the first state is valid for:
4 months
What is the most important and most used of the rights on default?
To take possession of and sell the collateral on default
A judicial action seeking the transfer of personal property:
Replevy action
Proceeds of a default sale are distributed in the following order:
- Pay the expenses of repossession and sale
- Pay creditors with a security interest in the collateral in order of priority
- Any surplus is pad to the debtor
If sale of the collateral does not bring in enough money to pay the expenses of the sale and the debt, the secured party may:
Bring a court action to recover the deficiency from the debtor
In consumer goods cases in which the debtor has paid at least 60% of the loan, the secured party must:
Sell the collateral within 90 days after repossession
