Perfection

Question 1

Methods of Perfection

Answer 1

Automatic
Possession of Collateral by SP
Perfection by Control
Notation of Lien on Certificate of Title
Filing Financing Statement

Question 2

Automatic Perfection

Answer 2

Perfection is automatic upon attachment

PMSI in consumer goods

Question 3

Perfection by Possession

Answer 3

SI perfected moment when SP takes possession of collateral

Question 4

Perfection by Control

Answer 4

Non-consumer deposit accounts
Investment Property
Electronic Chattel Paper

Question 5

Perfection by Notation of Lien on Certificate of Title

Answer 5

ONLY way to perfect item covered by certificate of title

Question 6

Filing FInancing Statement- Requirements

Answer 6

Debtor's Name
Description of Collateral
SP name
Debtor authorizes
Authenticated security agreement may be filed if it contains all requirements
Filed in appropriate office

Question 7

FS Debtor’s Name

Answer 7

If individual, name on unexpired license or individual name if no license. If corporation, corporate name; only trade name is insufficient
Errors are ok if they are not seriously misleading

Question 8

FS Debtor’s name change

Answer 8

If name change is seriously misleading, previous FS valid for 4 months; need to amend FS to remain effective after 4 months

Question 9

FS Description of Collateral

Answer 9

Reasonably identify collateral, supergeneric allowed unlike SA

Question 10

FS Secured Party Name

Answer 10

Error in SP name will not be seriously misleading

Question 11

FS for real property related financing

Answer 11

must also indicate to be filed in real property records
provide description of real property
name the record owner

Question 12

FS Authorization

Answer 12

Debtor automatically authorizes FS if they authenticated a SA covering the same collateral

Question 13

Where to file FS?

Answer 13

MI Secretary of State

Real Property- County Records where property located

Question 14

How long is a FS effective?

Answer 14

5 years from date of filing

Can be extended by filing a continuation statement in last 6 months of 5 year life

Question 15

Termination of FS

Answer 15

When there is no outstanding obligation of the debtor and no commitment
on the part of the secured party to make further advances, the secured
party, upon receiving an authenticated demand by the debtor, must within 20 days provide the debtor with a termination statement to the effect that the secured party no longer claims a security interest under the
financing statement.

If a financing statement covers consumer goods, then within one month after there is no outstanding obligation, or within 20 days of receiving an authenticated demand from the debtor, a termination statement must be filed by the secured party

Question 16

Fraudulent Financing Statements

Answer 16

Under Michigan law, a debtor may file an affidavit with the secretary of state stating that a filed financing statement is fraudulent. The financing statement must be terminated upon receipt of the affidavit, and notice of the termination must be sent to the filer of the financing statement.

If the filer believes in good faith that the statement is not fraudulent, he may
sue to reinstate the financing statement. The court determines whether the
financing statement should be reinstated and must forward an order reinstating the financing statement to the secretary of state. A reinstated
financing statement is effective as a filed record from the initial filing date

Question 17

Can a FS be filed prior to a SA?

Answer 17

Yes

Question 18

Perfection when there is a change in the use of collateral

Answer 18

Filed FS remains effective to perfect the security interest

Question 19

Perfection of Non-Consumer Deposit Accounts

Answer 19

ONLY way to perfect is by control

If controlling bank, automatic control
If not a bank, then putting the account in SP name OR by control agreement between debtor, bank, and SP

Question 20

Perfecton as to Proceeds

Answer 20

IF SP has a perfected interest in collateral, then automatically perfected in proceeds for 20 days

To remain perfected past 20 days take a new action to perfect unless:

• proceeds are identifiable cash proceeds or
• S.I. in original collateral was perfected by FS, a S.I. in proceeds would be perfected the same way, and proceeds were not purchased with cash proceeds of collateral

Question 21

What if collateral changes states?

Answer 21

The secured party will become unperfected one year after the collateral moves unless it files a financing statement in the new jurisdiction
before that one-year period is up.

Question 22

What if Debtor moves states?

Answer 22

The secured party will become unperfected 4 months after the debtor’s move unless it files a financing statement in the new jurisdiction
before that 4-month period is up.