Attachment Flashcards
What is a Security Interest?
An interest that gives the creditor rights to collateral. Usually through a security agreement.
How is a security interest created? (2 things)
When the debtor grants an interest; AND
the Creditor obtains an interest in the debtor’s personal property in order to be SECURED in the loan.
How is a creditor’s security interest in collateral most often accomplished?
Through the Security Agreement
When does a security interest become enforceable?
When it attaches to the collateral
State the issue statement for attachment.
Whether “creditor” is a secured creditor when it loaned “debtor” _____.
What is the Rule for Attachment?
A security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral. A security interest attaches when (1) the creditor give value, (2) the debtor has rights in the collateral, and (3) the debtor signs a written security agreement OR is in possession of the secured property.
The security agreement must show (1) intent to create a security interest, (2) be authenticated by the debtor, and (3) reasonably identify the collateral - NO super generic language.
When a Creditor Satisfies the Elements for Attachment, then:
They become a SECURED CREDITOR.
If an element is not met, then the creditor is UNSECURED.
What is a security agreement?
The contract between the debtor and creditor by which the debtor grants to the creditor (a secured party) a security interest in the collateral.
What is required for a security agreement?
Express intent to create a security interest
Authenticated by the debtor
Reasonably Identify the Collateral
* NO super generic language
**If the security agreement fails to meet this standard, then the creditor may not be secured.
What is the relation back exception to the attachment rule?
When there is an issue with one of the elements of attachment being met later in time, the party may still be attached.
It will relate back to the date the financing statement was filed.
