Collateral Flashcards
Security Interest - Concept
A property interest created by agreement or operation of law to secure performance of an obligation
Security Interest - UCC art 9 Purpose
- Reduce creditor risk in case of default of payment
- By securing obligation with collateral
Collateral - Concept
Property pledged as security against interest
Collateral - Types of Property (2)
1) Tangibles
2) Intangible
Collateral - Importance of distinction btwn tangible/intangible (3)
1) Method of perfection
2) Filing requirements (when apply)
3) Priority for creditors
SI -Tangible Property - Rules regarding use
- Primary use in debtor’s hands set as of date of attachment
- Primary use controls, independent of later use : i.e. Horse
- If later use modification, duty of report
SI - Tangible Property - Types (5) + 1
1) Inventory
2) Equipment
3) Consumer Goods
4) Farming products
5) Manufactured home + Proceeds
SI -Tangible Property - Inventory - Concept
Goods for sale or lease in ordinary course of business
SI -Tangible Property - Inventory - Includes/Excludes
- Includes: raw material, work in progress, materials used or consumed
- Excludes: farm products
SI - Tangible Property - Equipment - Concept
- Goods used or bought for use in the productive capacity of business
SI- Tangible Property - Equipment - Includes/Excludes
- Includes: machinery, manufacture, equipment, furniture, office computer and equipment
- Excludes: farm products and consumer goods
SI -Tangible Property - Consumer Goods - Concept
- Goods used or bought for non-business purposes, but for personal, family or household purposes
- Have no amount limit as collateral
- Need of more detailed description
- i.e.: house furniture, personal computer, TV
SI -Tangible Property - Farming Products
- Include: Crops, livestock and supplies (i.e. fertilizers)
- Exclude: Farm machinery (is equipment)
SI -Tangible Property - Manufactured Home
Fixed dwelling structure over 320 sq/f with plumbing, heating, AC, electrical system, etc.
Intangible Property - Types (11) + 1
1) Instrument: negotiable or other (i.e. promissory note)
2) Document of title
3) Chattel Paper
4) Account
5) Deposit Account
6) Investment property
7) Commercial tort claim
8) Letter of credit
9) Insurance Policy proceeds
10) Financing Lease of personal property
11) Gral - “residual” + Proceeds thereof