BAR ESSAYS

Question 1

Generally, a security interest that is enforceable against the debtor with respect to collateral is said to have…

Answer 1

attached to the collateral. To attach, three conditions must coexist: (1) the secured party has given value; (2) the debtor has rights in the collateral; and (3) the debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security. agreement.

Question 2

A debtor may give a secured party a security interest in…

Answer 2

collateral that the debtor not only currently has rights in but also will acquire rights in in the future (after-acquired property).

Question 3

When there are two or more unperfected secured parties with rights in the same collateral…

Answer 3

the “first-in-time, first-in-right” rule applies, with the critical time being the time of attachment. The first to attach has priority.

Question 4

A security interest in collateral automatically attaches to…

Answer 4

proceeds. If the security interest in the original collateral is perfected, a security interest in proceeds is temporarily perfected for 20 days from the time it attaches; Also, PMSI in consumer goods (indefinite), when the debtor moves (4 months), movement of collateral to another state (1 year), identifiable cash proceeds (indefinite), a negotiable document (20 days).

Question 5

A buyer takes free of an unperfected security interest if:

Answer 5

the buyer gives value, receives delivery of the collateral, and purchases without knowledge of the preceding interest.

Question 6

Under Article 9, a secured party can perfect the security interest by…

Answer 6

filing a financing statement, possession of the collateral, control over the collateral, or automatic perfection.

Question 7

A security interest is perfected upon:

Answer 7

(1) attachment of the interest and (2) compliance with one of the methods of perfection. i.e. filing a financing statement. Although typically perfection takes place in this order, if the filing of the financing statement occurs before attachment, the interest perfects when it attaches.

Question 8

Perfection by possession for:

Answer 8

goods, instruments, negotiable documents, tangible property, and cash. Possession is the exclusive method of perfecting cash.

Question 9

Perfection by control for:

Answer 9

deposit accounts, instrument property, electronic documents or chattel paper, and letter-of-credit rights. Control is the exclusive method of perfecting letter-of-credit rights and deposit accounts.

Question 10

When there are two or more perfected secured parties with rights in the same collateral…

Answer 10

the first to file or perfect has priority, whichever occurs first. However, special priority may be given to a PMSI over a non-PMSI.

Question 11

If the debtor changes its name and the filed financing statement becomes seriously misleading, the secured party…

Answer 11

has four months in which to file an amendment to the financing statement reflecting the new name. If the secured party fails to amend, collateral acquired after the four-month period is not covered by the financing statement.

Question 12

To be valid, a financing statement must include:

Answer 12

the debtor’s name, the secured party’s name, and a description of the collateral. The description may be super generic. The debtor’s name must be the name listed on a valid state issued ID and if no ID, the surname and first personal name of the debtor. If the debtor is a corporation, it must be the name shown on the public registration records.

Question 13

A financing statement must be filed with…

Answer 13

the Secretary of State of the state where the debtor has their principal residence or where an organization is registered. If not registered, in the state where the organization has its chief executive office.

Question 14

A financing statement is effective for… (duration)

Answer 14

5 years from the date of filing. To extend, a continuation statement must be filed within the final 6 months prior to expiration of the FS. The FS may be terminated prior to the 5 year mark by filing a termination statement.

Question 15

A buyer of collateral subject to a perfected security interest takes…

Answer 15

subject to that interest, unless the secured party has authorized its sale free of its security interest.

Question 16

BIOCOB

Answer 16

Takes free of a security interest created by the buyer’s seller even if perfected if the buyer: (i) buys goods, (ii) in the ordinary course of the seller’s business, (iii) from a merchant who is in the business of selling goods of that kind, (iv) in good faith, and (v) without actual knowledge that the sale violates the rights of another in the same goods.

Question 17

A consumer buyer of consumer goods…

Answer 17

takes free of a security interest, even if perfected, unless prior to the purchase, the secured party filed a financing statement covering the goods.

Question 18

PMSI in good exists with respect to goods when…

Answer 18

a secured party sold goods to the debtor, and the debtor incurs an obligation to pay all of part of the purchase price.

Question 19

A PMSI in goods other than inventory or livestock…

Answer 19

prevails over all other security interests in the same collateral, even if they were previously perfected, if the PMSI secured party perfects before or within 20 days after the debtor receives possession of the collateral.

Question 20

A PMSI in inventory or livestock generally prevails over all other interests in the same collateral, even if they were previously perfected, if…

Answer 20

the PMSI is perfected by the time that the debtor receives possession of the collateral AND the purchase-money secured party sends an authenticated notification of the PMSI to the holder of any conflicting security interests.

Question 21

After default, a secured party is entitled to…

Answer 21

take possession of the collateral. A secured party is not required to give notice of default, not is it required to give notice of its intent to repossess the collateral.

Question 22

For repossession, a secured party is required to use…

Answer 22

judicial process to obtain possession of the collateral unless possession can be obtained without a breach of the peace.

Question 23

“Breach of the Peace”

Answer 23

Not defined by Article 9; the determination depends on the surrounding facts and circumstances. Generally found when there is a trespass on the debtor’s residence or garage if the debtor physically objects to the seizure of the collateral. Mere verbal objections are held to be a breach by some courts but not by others.

Question 24

After repossession, what may a secured party do with the property?

Answer 24

The SP may sell, lease, license, or otherwise dispose of all or any of the collateral. The SP may also accept the collateral in full or partial satisfaction of the obligation secured by the collateral.

Question 25

A secured party may accept collateral in full satisfaction of an obligation secured by collateral when:

Answer 25

(i)the debtor consents to the acceptance in an authenticated record, or (ii) if the debtor does not object to the SP’s proposal to accept the collateral within 20 days after the proposal is sent.

Question 26

To effect a redemption…

Answer 26

the redeemer must fulfill all obligations secured by the collateral and reasonable expenses incurred by the SP in retaking the collateral or preparing for its disposition. If the security agreement contains an acceleration clause, the redeemer must tender the entire balance of the secured obligation.

Question 27

Under the Bankruptcy Code, a trustee may avoid any transfer of property of the debtor is the trustee can establish the following:

Answer 27

(i) the pre-bankruptcy transfer was to or for the benefit of a creditor; (ii) the transfer was made on account of an antecedent debt; (iii) the debtor was insolvent at the time of the transfer; (iv) the transfer was made within 90 days of the filing of the bankruptcy petition; and (v) the transfer has the effect of increasing the amount that a transferee would receive in a Chapter 7 case. However, there is an exception to the trustee’s ability to avoid a transfer when the transfer is intended as a contemporaneous exchange for new value.

Question 28

Financing statements for collateral related to real property

Answer 28

Financing statements for collateral that is related to real property must contain, in addition to information generally required for all financing statements, an indication that it covers collateral related to real property, an indication that it is to be filed in the real property records of the county in which the real property is located, a description of the real property to which the collateral relates, and the name of the record owner of the real property. This information is in addition to all of the information normally required for a fixture filing with respect to goods that are to become fixtures. The financing statement should also contain the address of the debtor and the secured party, it should identify whether the debtor is an individual or organization, and it should contain additional information regarding the organization if the debtor is an organization. Any interest in real property must be filed in the office for recording a mortgage on the related real property.

Question 29

PMSI in consumer goods

Answer 29

A purchase money security interest (PMSI) exists if a secured party gave value to the debtor to enable the debtor to acquire rights in or use of the goods. It also arises when the secured party sold goods to the debtor, and the debtor incurred an obligation to pay the secured party all or part of the purchase price. PMSIs in consumer goods are automatically perfected upon attachment. Attachment occurs when the debtor has a security interest that is enforceable against the debtor with respect to the collateral. For a security interest to be enforceable against the debtor, value must have been given, the debtor must have rights in the collateral, and there must be a security agreement that the debtor has authenticated.

Question 30

PMSI in fixtures

Answer 30

A PMSI in fixtures has priority over a prior interest in the real property with which the fixtures are associated when the debtor has an interest of record in the real property or is in possession of the real property and the security interest is perfected by a fixture filing before the goods become fixtures or within 20 days thereafter.