attachment

Question 1

what is attachment

Answer 1

process by which a party obtains a security interest in the collateral that is effective against the debtor, rendering the party a “secured creditor” under Article 9.

Question 2

requirements for attachment

Answer 2

(1) security agreement

(2) value given by secured party
[any consideration, even past consideration]

[note that debtor implicitly promises to repay the loan, which is the value given to the creditor]

(3) debtor must have rights in the collateral [possession, or ownership]

Question 3

how can a security agreement be made

Answer 3

(1) authenticated security agreement [written]

(2) creditor taking possession of the collateral [i.e. oral agreement]

or

(3) creditor taking control of non consumer deposit accounts, electronic chattel paper, or investment property [i.e. oral agreement]

Question 4

requirements for authenticated security agreements

Answer 4

(1) evidenced by a record (written or ESI) that shows intent to create security interest

(2) authenticated by the debtor (signature or symbol, etc.)

(3) description reasonably identifies the collateral
– consumer goods, consumer securities accounts, commercial tort claims must be specifically identified, not by type alone
– other property: “inventory” or “all debtor’s equipment” or “debtor’s TV” is fine
– NOT supergeneric descriptions (“all debtor’s assets”)

Question 5

scope of security agreement

Answer 5

(1) AFTER ACQUIRED PROPERTY
– security interest reaches after acquired property if there is such a clause in the agreement
or
– if no clause, will include after acquired property anyway when there are rapidly depleting items [accounts, inventory]
– does not apply to consumer goods unless debtor acquires rights in them within 10 days after creditor gives value
– does not apply to commercial tort claims

(2) FUTURE ADVANCES
security agreement may provide that collateral will be security for other future advances made to the debtor, if there is a future advances clause

(2) PROCEEDS
sec interest will automatically attach to identifiable proceeds of collateral

Question 6

what are proceeds

Answer 6

include whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds

insurance payable by reason of loss or damage to the collateral is a proceed, unless it is payable to someone other than the debtor or secured party.

Claims arising out of the loss of, defects in, or damage to collateral also are proceeds.

Question 7

“identifiable” proceeds

Answer 7

can be traced back to the original collateral

Question 8

tracing commingled cash proceeds

Answer 8

lowest intermediate balance rule applies:

look at bank account starting at the time the proceeds are deposited and ending at the time you are applying the rule. The lowest balance during that time period is the secured party’s identifiable proceeds.

cannot exceed cash proceeds originally deposited