Perfecting Security Interests

Question 1

When does “perfection occur”?

Answer 1

Attachment + a method of perfection

Question 2

What are the methods of perfection?

Answer 2

filing
possession/control
automatic perfection (PMSI)

Question 3

What is the significance of perfection?

Answer 3

a perfected SI has maximum priority over collateral as compared to other unperfected SIs in that collateral

Question 4

What are the requirements for filing a financing statement?

Answer 4

the financing statement must:

• ID debtor (exact name must match)
• ID SP/Creditor
• Describe the collateral

Question 5

How does one perfect a SI in a motor vehicle?

Answer 5

by notation on the vehicle’s certificate of title

Question 6

What is a PMSI?

Answer 6

Creditor sells goods to debtor (or advances funds to buy goods) and reserves a SI in the goods themselves

Question 7

PMSI & Auto-Perfection

Answer 7

A PMSI in Consumer Goods will perfect automatically upon attachment, there is no requirement of filing a FS

Question 8

What things automatically perfect?

Answer 8

PMSI in Consumer Goods
Small Assignment of Accounts
Sale of Payment Intangibles or Promissory Notes

Question 9

What is the limitation on the automatic perfection of assignment of accounts?

Answer 9

assignment must not transfer a significant portion of the assignor’s outstanding accounts or intangibles

Question 10

Temporary Perfection of Proceeds

Answer 10

SIs in identifiable proceeds from original collateral is perfected automatically for 20 days (from debtor’s receipt of the proceeds) but may become unperfected on the 21st day.

Question 11

When will the perfection of identifiable proceeds continue past the 20 day mark?

Answer 11

• SI in original collateral was perfected by filing
• Proceeds are identifiable cash
• SI in proceeds is perfected by creditor within the 20-day period