Perfection Flashcards
Perfection
Deals primarily with rights between a secured party and third party creditors. If the security interest is perfected, the secured party may assert their rights against other creditors. A security interest is perfected when it has attached and some additional step has been taken.
Purchase money security interest in a consumer good
a PMSI in consumer goods is automatically perfected upon attachment.
Possession by a secured party
A secured party may perfect a security interest in most types of collateral by taking possession of the collateral. The security interest is perfected from the moment of possession without relation back to the time of attachment. Possession only constitutes perfection so long as possession is retained.
Control
Security in investment property and chattel paper may be perfected by control. Security interests in nonconsumer deposit accounts can only be perfected by control.
Methods of control for nonconsumer deposit accounts
- automatic control by a bank maintaining nonconsumer deposit accounts (Chase has an automatically perfected security interest in a nonconsumer deposit account at Chase bank)
- putting the account in the secured party’s name
- control agreement - agreeing in authenticated record between debtor and maintaining bank that the bank will follow the directions of the secured party without input by the debtor.
Control over investment property
secured party has control when they have taken whatever steps are necessary to be able to have the investment property sold without further action from the owner
control over electronic chattel paper
a party has control over ECP when a system showing transfer of interest in chattel paper reliably establishes the secured party as assignee
Notation of a lien on the certificate of title
the ONLY way to perfect a security interest in a good governed by a certificate of title statute (Cars, etc.). must have the DMV note the secured party’s lien on the certificate of title.
Exception: if someone is holding the cars/other goods as inventory, then will have to file financing statement.
contents of filing statement
debtor’s name - indexed by debtor’s name. names of individuals should be the name on unexpired license or other form of ID. trade name is not enough. can be corp name or partnership name. if debtor changes name so that financing statement is seriously misleading, financing statement only perfects within 4 months of change, then must be amended
description of collateral - can even be “all of debtor’s assets” - does not have to mention after acquired property if description is broad enough to cover
secured party’s name - typos are ok
no signature required but debtor must authorize the filing
real property related financing statements
if covers real property related collateral like timber or fixtures, financing statement must also indicate it is to be filed in real property records, provide description of real property to which collateral is related
filing security agreement instead of financing statement
if filed, must contain elements of financing statement
where to file financing statement
virginia’s state corporation commission
for real estate, must be filed in office where mortgage would be filed
length of financing statement
5 years
continuation statement
extends financing statement, must be filed in last 6 months of 5 year life of filing statement
termination of financing statement
when no outstanding obligation and no commitment to make further advances, secured party, upon receiving authenticated demand by debtor, must within 20 days provide debtor with termination statement to the effect that the secured party no longer claims security interest under financing statement
if financing statement covers consumer goods, then within one month after no outstanding obligation, or within 20 days of receiving demand, termination statement must be filed
can you file financing statement before entering into a security agreement
yes
perfection as to proceeds
if secured party has perfected security interest in collateral, has automaticaly perfected security interest in proceeds for 20 days. To remain perfected in those proceeds beyond 20 days, must take new action to perfect unless proceeds are identifiable cash proceeds or security interest in original collateral was perfected by filing financing statement, a security interest in collateral constituting proceeds would be perfected by filing in same place, and proceeds not purchased with cash proceeds of collateral
change in use of collateral
if debtor changes use of collateral, filed financing statement for previous use remains effective, even if it is seriously misleading
