Chapter 7 Section 2: Secured Transactions Flashcards
What is a secured transaction??
Debt secured by collateral
What is a security interest?
Right of creditor to repossess upon default
When is a security interest effective between parties?
Upon attachment
What gives a creditor rights against other third parties who also have interest in the collateral?
Perfection
What is the scope of Article 9?
Most contractual security interests in personal property or fixtures
What does Article 9 specifically not apply to?
Interests in land (mortgages), wage claims, and statutory leins
What is PMSI?
Purchase money security interests - has priority over all other types of security interests in the same collateral, if it is property perfected
What makes a PMSI?
Creditor sells collateral to debtor on credit, retaining a security interest for purchase price or
Creditor advances funds used by the debtor to purchase collateral
What are the three types of collateral?
Consumer goods (personal use)
Inventory (for sale or lease)
Equipment (business use)
What are the three requisites for attachment?
- Agreement creating interest evidenced by either authenticated record signed by debtor or creditor’s taking possession or control of collateral
- Value must be given by the secured party in exchange for the interest
- Debtor must have rights in the collateral
What is an authenticated record?
Written agreements or computer files authenticated by a signature or electronic mark
Is after-acquired property permissable?
Yes
What is after-acquired property most commonly used for?
Inventory and equipment
What is perfection?
Gives you maximum priority in the collateral over most third parties
What are the five methods of perfection?
Filing Taking possession of the collateral Control Automatic perfection Temporary perfection