Perfection

Question 1

Perfection

Answer 1

Creates a superior right in the collateral for the secured party over other third parties’ rights

Occurs upon attachment and compliance with one of the methods of perfection

Question 2

How to Perfect

Answer 2

Methods: filing a financing statement, exercising possession or control over the collateral, or automatic perfection

Note: even if the requirements are satisfied before the security interest attaches, there is still perfection

Question 3

Financing Statement

Answer 3

Must be filed to perfect ALL security interests except those perfected by possession (tangibles) or control (securities)

Must be filed with appropriate state’s Secretary of State

Question 4

What must a financing statement contain to be valid?

Answer 4

1. Debtor’s name
2. Secured party’s name
3. A description of the collateral (generic description ok here)

Question 5

What is required for the debtor’s name in a financing statement?

Answer 5

The name on the debtor’s current driver’s license or state-issued identification card

Note: A debtor’t trade name is insufficient by itself; a trade name is not needed if the debtor’s name is correctly provided

Question 6

What is the effect of an error in the debtor’s name on a financing statement?

Answer 6

If there is an error in the debtor’s name, then the financing statement will not be effective unless a standard search under the debtor’s correct name would disclose the statement

Question 7

What is the effect of an error in the secured party’s name on a financing statement?

Answer 7

An error in the name of the secured party generally doesn’t affect the perfection of the security interest, but could subject the secured party to estoppel in favor of another claimant

Question 8

When is a financing statement not needed?

Answer 8

For collateral in the secured party’s possession or control. Also not needed for proceeds since proceeds are perfected if the original collateral is perfected.

Question 9

Perfection by possession

Answer 9

Perfection only lasts for the period of possession and does not require a financing statement

Question 10

Automatic Perfection

Answer 10

Perfected once a security interest attaches

Note: PMSIs in consumer goods automatically perfect

Question 11

Perfection of Cash Proceeds

Answer 11

Perfected if the security interest in the original collateral was perfected

Question 12

Perfection by Control

Answer 12

Essentially the same thing as perfection by possession but for bank accounts and investment property

Exists only while the secured party retains control