Once attached, how does the creditor attain PERFECTION?

Question 1

Once attached, how does the creditor attain perfection?

Answer 1

By putting the world on record or constructive notice of its existence

Perfection = Publicity

Question 2

Def: Perfection

Answer 2

Something that the secured party does to put the world on RECORD or CONSTRUCTIVE notice of the secured party’s existence. PROPER PERFECTION HELPS TO PROTECT THE SECURED PARTY FROM COMPETING CREDITORS.

Question 3

The Diana Ross Rule:

Answer 3

THE CREDITOR WHO PROPERLY PERFECTS FIRST IS SUPREME

Question 4

Ways of Attaining Perfection

Answer 4

1- secured party taking possession of the collateral
2- automatic perfection upon attachment for purchase money security interests (PMSI’s) in CONSUMER GOODS.
**3- Most Common: secured party FILES NOTICE of the security interest in the public records. Proper filing puts the world of potentially competing creditors on record or constructive notice of the filer’s claim.

Question 5

How do you perfect by filing notice?

Answer 5

• You can file EITHER the security agreement OR a FINANCING STATEMENT, which is a very SIMPLE & SPARSE document containing debtor & creditors names & addresses and a description of the collateral.

WHERE TO FILE:

• w/ the secretary of state in the state where debtor is located
• if debtor is individual, she is located in the state of principal residence
• if debtor is an org, it is located in the state under whose laws it is organized
• EXCEPTION– if the collateral is TIMBER, MINERALS, or FIXTURES, file locally in the county where the land is located.