In General

Question 1

What is a secured transaction generally?

Answer 1

A debtor makes a purchase on credit and gives creditor a secured interest in specific property.

Governed by Article 9 of the UCC

Question 2

What are the types of eligible transactions for secured transactions?

Answer 2

General Rule: Transaction that creates, by agreement, a security interest in personal property or fixtures.

Leases

• Only covered when economic reality or substance is that it is a secured transaction.
• Bright Line Test (if met, must file to perfect): Lessee must pay consideration to lessor for right to use goods, payment obligation cannot be terminated, and; (1) original terms s equal or greater than remaining economic life of goods; (2) bound to renew lease, and no new consideration; (3) option to renew; or (4) option to become owner.
• If test not met, look to facts.

Consignments

• Treated as PSMI in inventory.
• Requirements: (1) a person must deliver goods to merchant and (2) merchant must deal in goods of that kind, (3) not operate under name of cosigner, (4) not be generally known to creditors to be substantially engaged in selling goods of other, (5) not be an auctioneer, and (6) must be over $1000. (Note: and not consumer goods).

Liens/Agricultural Liens

Question 3

What are the different types of classifications of collateral?

Answer 3

Goods
- Anything movable at the time of attachment (including fixtures, unborn animals, standing timber, and growing crops).
- Consumer goods
- Farm products (not equipment)
- Inventory
- Equipment
Note: Classifications can change, principal use test.

Rights to Repayment

• Instrument
• Chattel Paper
• Accounts
• Payment intangibles

Other
- Documents, investment property, deposit accounts, tort claims.

Question 4

When are goods classified for classification issues?

Answer 4

When security interest attaches.

Question 5

What happens when there is multiple uses by two or more debtors?

Answer 5

Same property in different classes.

Question 6

What happens when there are multiple uses by a single debtor?

Answer 6

Principal use test.

Question 7

What are the three general parties to a secured transaction?

Answer 7

Secured party, obligor, and debtor.

Question 8

What are the four main issues for secured transactions?

Answer 8

Attachment, perfection, priority, enforcement.