Perfection Flashcards
What is perfection
Perfection establishes a secured party’s rights in the collateral against third parties.
Requirements for perfection
- Attachment
- Perfection
Ways of perfecting security interest
- Filing financing statement
- Control
- Possession
Perfection by Financing Statement
-properly file financing statement
-include the required information
-purpose is to provide notice that there’s a security interest in the collateral described in the FS
Where does FS get filed
FS must be filed at the secretary of state’s office in the jurisdiction where:
- if debtor is a person, their principal residence
-if debtor is a registered organization then the state of organization
-if collateral is a figure then the county clerk’s office in the county where the land to which the fixture is attached is located
Information included in financing statement
-names of debtor and secured party
-sufficient description of collateral to be covered by financing statement
Criteria for sufficient description of collateral in financing statement
description of collateral is sufficient if it
1. reasonably identifies what is described including by UCC type of collateral
2. has a super-generic description
Requirements for fixture filings
Financing statements for fixture filings must also:
-indicate that it covers a fixture
-indicate that it will be filed in the real property records
-describe the real property to which the fixture is related
-provide the name of the owner of the real property, if different from the debtor
When will financing statement be ineffective?
-fi it’s filed in the wrong place
-if FS doesn’t include the required information
-if FS isn’t authorized by debtor
Are filing statements with minor errors effective
Yes, unless the errors render the financing statement seriously misleading
-failure to sufficiently provide Debtor’s name is seriously misleading, unless a search of the records using the financing officer’s standard search logic would disclose the financing statement
How long is financing statement effective
5 years from date of filing
What does the filing statement need to be updated
-certain proceeds from original collateral
-debtor’s name change (new FS must be filed within 4 months)
-debtor moves to another state (new FS must be filed within 4 months)
How to perfect proceeds from original collateral
-security interest in proceeds from original collateral is perfected automatically for 20 days, unless security agreement says otherwise
-automatic perfection continues after 20 days only if: (1) a filed financing statement covered original collateral, the collateral proceeds are a type of collateral that can be perfected by filing in the office in which the filing statement has been filed, and the proceeds aren’t acquired with cash proceeds; (2) the proceeds are identifiable cash proceeds or (3) the SI in proceeds is otherwise perfected when the security interest attaches to the proceeds or within 20 days thereafter
How to extend perfected security interest
-must file a continuation statement within six months before the five-year period expires
-without filing a continuation statement, the FS will lapse and become ineffective such that previously perfected SI will now be unperfected
Perfection by possession
Security interest is perfected if the secured party or a third-party authorized by a secured party takes possession of the collateral
