III. CLASSIFICATION OF COLLATERAL

Question 1

Overview:

Answer 1

Mutually exclusive — Any particular item can be only one type of collateral.
Debtor’s use determinative — Classify collateral from the __debtor’s__ perspective.

Question 2

A. GOODS
1. In General

inclusion & exclusion

Answer 2

a. Movable Items & Fixtures
b. Specific Inclusions
(1) Standing timber
(2) Growing crops
(3) __unborn__ of Animals
c. Specific Exclusions
(1) Money
(2) minerals Before Extraction
(3) Collateral That Fits Other Categories

Question 3

2. Classifications of Goods

collateral depending how debtor’s use
farmer getting eggs from his chicken-
eggs sold in grocery store-
consumer go buy eggs- 
use the egg to make cake-

Answer 3

to perfect, must clearly state which kind, especially when filing statement, “accounts and equipment” doesnt include consumer goods, “all other assets” not specific enough to describe consumer goods or inventory

farm products, inventory, consumer goods, equipment

a. Consumer Goods — personal, family, or household purposes

b. Equipment — business purposes
Goods used or bought for use primarily in business (including __farming_ or a profession).
Equipment is the default category; if a good does not fit within the other three categories

c. Inventory
(1) Goods held for sale or ___lease__ in the ordinary course of business
(2) Raw material & work in progress
(3) Consumed materials (pencils, yellow pads)

d. Farm Products
To be a farm product, two requirements must be satisfied:
(1) In possession of the farmer engaged in farming operations (not if owner stopped being farmer), and
(2) In an __unmanufacture_ condition

e. Multiple Uses — principal use determinative

Question 4

B. SEMI-TANGIBLE AND INTANGIBLE COLLATERAL

Answer 4

1. Instruments (represent money, draft or notes)
2. Documents (represent goods)
   a. Warehouse Receipt — goods in storage
   b. Bill of Lading — goods in transit
3. Chattel Paper
   Single writing or group of writings evidencing two things.
   a. Monetary Obligation (e.g., promissory note), plus
   b. Security Interest in or Lease of Goods
4. Account
   Any right to the payment of money for goods sold or leased or for services rendered not evidenced by an instrument or chattel paper.
5. Deposit Accounts
6. Investment Property
7. Commercial Tort Claims
   8, general intangibles IP

Question 5

C. PROCEEDS

Answer 5

Proceeds are whatever is received upon the __sale_, exchange, collection or other disposition of collateral or proceeds.

Example: David used his truck and his computer as collateral for a loan. Later, he traded in the truck for a motorcycle and sold the computer for cash. The motorcycle and the cash are