Perfection Flashcards
What is perfection?
When a security interest has attached and the secured party has taken the necessary steps to give third parties notice of the security interest
What is the purpose of perfection?
Protects the secured party’s security interest from being subject to claims of other creditors
Can an unattached security interest be perfected?
No
What are the five methods of perfection?
(1) Perfection by filing a financing statement
(2) Possession
(3) Control Agreement
(4) Security interest indicated on title
(5) Automatic perfection on attachment
What must a secured party file for its interest to be perfected?
A financing statement
What are the requirements for a financing statement?
(1) Authorized by debtor
(2) Properly filed
(3) Sufficient
When is a financing statement deemed to be authorized?
When the debtor authenticates a security agreement
What must be included in a financing statement for it to be sufficient?
(1) Debtor’s name
(2) Secured party’s name
(3) Indication of the collateral
Are supergeneric descriptions of collateral permissible on financing statements?
Yes
Are choice of law provisions in security agreements enforceable?
No
What happens if a debtor disposes of a property in which a creditor has a perfected security interest?
Security interest in the proceeds remains effective for 20 days. Interest becomes unperfected on 21st day unless:
(1) A new financing statement is filed
(2) The proceeds are cash proceeds; or
(3) Means of perfecting in the original collateral was sufficient to perfect a lien in the proceeds
How long is a financing statement valid for?
5 years
How may a financing statement be continued?
By filing a continuation statement within the last 6 months of the five year period
When will a security interest be perfected by a control agreement?
When the collateral is an uncertificated security or a deposit account
When must a security interest be indicated on a title?
When the goods are subject to a certificate of title
