CLASSIFICATION OF COLLATERAL

Question 1

Primary Use Test

Answer 1

How is the D’or primarily using the goods at the time the security interest attaches.

Question 2

i. GOODS

Answer 2

All things movable at the time of attachment. FICE
1. Consumer goods – Personal, family, household
2. Equipment – goods that are not consumer goods, inventory, or farm products, Durable goods used by business, such as machinery - long term
3. Farm products – produced in farming operation or in unmanufactured state, possessed by debtor engaged in farming operations (includes crops and animals)
4. Inventory – held for sale or lease – short term & goods consumed by a business (fuel used to run factory)

Question 3

INTANGIBLES & SEMI-INTANGIBLES

Answer 3

1. Instruments – writing that evidences a right to payment (notes, drafts, cert. of deposit)
2. Documents - writing that evidences a right to goods (bills of lading and warehouse receipts)
3. Chattel paper – record that evidences a monetary obligation and security interest (Promissory note)
4. Investment property – Stocks & bonds, mutual funds, brokerage accounts
5. Accounts - right to payment for goods/services not evidenced by writing (accounts receivable)
6. Deposit accounts – non-consumer acct maintained at a bank (savings account, passbook)
7. Commercial tort claims
8. General intangibles – catch all

Question 4

PROCEEDS

Answer 4

Proceeds include whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds. Proceeds include second generation proceeds. Insurance payable by reason of loss or damage to the collateral is a proceed, unless it is payable to someone other than debtor or secured party.