Mod 29 Secured Transactions Flashcards
Chattels
Personal property
Purchase Money Security Interest (PMSI) Creditor 2
1 creditor who advances money or credit to enable a debtor to
Obtain collateral and
2 takes security interest in collateral
After Acquired Property Clause
2) it is used most often with…
Creditor takes as collateral property to be acquired by debtor at
Later date
2) used most often with inventory and equipment
Attachment is…
Creditor’s rights vs. the debtor only
3 elements of Attachment
1 agreement
2 value by creditor
3 debtor must have rights
Attachment elements:
Agreement
Must have agreement between creditor and debtor (oral or written)
Attachment elements:
Must have an agreement between the creditor and debtor 2
1 written agreement need only be signed by debtor
2 can be oral only if creditor takes possession with debtor’s
agreement (pledge)
Attachment elements:
Value
Must have value given by creditor
Attachment elements:
Debtor must have…
Debtor must have rights in collateral
There is no attachment until…
All 3 elements have occurred
Perfection is…
Creditor’s rights vs. subsequent 3rd parties
Creditor is unperfected
Creditor is unprotected
Perfection by creditor
Taking possession of collateral with debtor’s agreement
Perfection by Creditor taking Possession of the collateral with debtor’s agreement
Only way to perfect with negotiable instruments or stocks and
Bonds
Perfection by Filing a Financing Statement:
Gives…
Constructive notice to all 3rd parties of the security interest
Perfection by Filing a Financing Statement:
Must contain…3
1 names and addresses of parties
2 general description of collateral
3 signature of debtor
Perfection by Filing a Financing Statement:
Filing is the only way to…
Perfect accounts receivable
Perfection by attachment is…
An automatic but very limited type of perfection
Perfection by Attachment:
Can only occur with…
PMSI Creditors in consumer goods
Perfection by Attachment:
One who perfects by attachment beats…
All other creditors
Perfection by Attachment:
One who perfects by attachment loses…
Loses collateral to any consumer purchaser from debtor without
Notice of security interest
One who perfects by attachment loses collateral to any consumer purchaser from debtor without notice of security interest. How can you protect against this?
Can protect against this by filing
Usually a perfected creditor beats…
A purchaser from debtor
2 exceptions when perfected creditor loses to a purchaser from debtor
1 one who perfects by attachment loses to purchaser without notice
2 one who buys from a merchant in ordinary course of business
Takes free of all security interests
one who buys from a merchant in ordinary course of business
Takes free of all security interests even…
If they had notice of the security interest
Priority with multiple creditors:
Usually the first creditor to…
File or perfect wins (1st in time is 1st in line)
Usually the first creditor to file or perfect wins:
2 exceptions
1 PMSI Creditor in noninventory collateral
2 PMSI creditor in inventory collateral
Usually the first creditor to file or perfect wins: exception
Purchase Money Security Interest (PMSI) Creditor in non inventory collateral…
Has priority if they file within 20 days of debtor getting possession
Usually the first creditor to file or perfect wins: exception
Purchase Money Security Interest (PMSI) Creditor in inventory collateral…
Has priority if before Debtor gets possession they file and give
Written notice to creditors ahead of him
Collateral perfected in one state and moved to another state…
Remains perfected 4 months after arrival in new state
3 remedies of creditor after default
1 repossess
2 strict foreclosure
3 sue debtor
3 remedies of creditor after default:
Repossess
Peacefully repossess the collateral and sell or lease it
Peacefully Repossess the collateral and sell or lease it:
Can be sold at…2
1 public sale and
2 creditor can bid
Peacefully Repossess the collateral and sell or lease it:
Can also be sold at…2
1 sold at private sale and
2 creditor usually cannot bid
Peacefully Repossess the collateral and sell or lease it:
After sale debtor is…2
1 liable for any deficiency and
2 entitled to any surplus
Secured Transaction
Debt secured by personal property
Peacefully Repossess the collateral and sell or lease it:
A good faith purchaser for value at public sale…2
Takes free of that interest and all subordinate liens
Peacefully Repossess the collateral and sell or lease it:
Debtor can redeem the property by…
Paying all secured creditors in full
Strict foreclosure define
Creditor keeps collateral but must cancel entire debt
Strict foreclosure:
If debtor or other creditors object…
Within 21 days creditor must sell
Strict foreclosure:
If debtor has paid 60% or more of price of consumer goods…
Creditor must sell unless debtor waives the right
Remedies for creditor after default:
Sue debtor for debt and…
Reduce claim to a judgment
Sue debtor for debt and reduce claim to judgement
Often used if collateral is insufficient to pay debt (called a deficiency judgment)
Attachment define
Creates the secured transaction
Security agreement
Written agreement (of attachment)
Perfection define
Creditor gives notice to all other creditors that he has first rights
To the collateral
