Perfection

Question 1

When perfection happens

Answer 1

An SI is perfected upon: attachment + perfection (if perfected first, then perfection occurs upon attachment)

Question 2

Ways to perfect

Answer 2

(1) filing financing statement
(2) possession
(3) control
(4) automatic perfection

Question 3

Where to file financing statement

Answer 3

• If collateral is a fixture –> the county clerk’s office in the county where the land to which the fixture is attached is located
• All other collateral –> the secretary of state’s office in the jurisdiction where Debtor is located

Question 4

Where debtor is located for filing financing statement

Answer 4

§ Debtor is an individual: located at the person’s principal residence

§ Debtor is a non-registered organization (e.g., partnership): located at its place of business (If more than one place of business, at its chief executive office)

§ Debtor is a registered organization (e.g., corporation): located in its state of organization

Question 5

Purpose of financing statement

Answer 5

Purpose of a FS is to provide notice that there’s an SI in the collateral described

Question 6

What must FS include

Answer 6

§ names of Debtor and the SP (or their representative); and
§ a sufficient description of the collateral covered by the FS

Question 7

Sufficient description for FS

Answer 7

A description of the collateral is sufficient if:
* it reasonably identifies what is described, including by UCC type; or
* it has a super-generic description

Question 8

Additional filing contents for fixtures

Answer 8

§ A fixture filing must also:
o indicate that it covers a fixture;
o indicate that it will be filed in the real property records;
o describe the real property to which the fixture is related; and
o provide the name of the owner of the real property, if different from Debtor

Question 9

When is FS ineffective

Answer 9

• FS is ineffective if it:
  § is filed in wrong place
  § does not include the required information, or
  § is not authorized by Debtor

Question 10

FS with minor errors

Answer 10

FS with minor errors is effective unless the errors make it seriously misleading

Question 11

Failure to provide debtor’s name in FS

Answer 11

Failure to sufficiently provide Debtor’s name is seriously misleading, unless a search of the records using the financing office’s standard search logic would disclose the FS

Question 12

FS effectiveness if proceeds from original collateral

Answer 12

Unless the security agreement states otherwise, an SI in proceeds from the original collateral is perfected automatically for 20 days

Question 13

Automatic perfection of proceeds after 20 days

Answer 13

§ Automatic perfection of proceeds continues for only 20 days after attachment (receipt of proceeds by debtor) if:

o a filed FS covers the original collateral, the proceeds are collateral in which a SI may be perfected by filing in the office in which the FS has been filed, and the proceeds are not acquired with cash proceeds;

o the proceeds are identifiable cash proceeds; or

o the SI in proceeds is otherwise perfected when the SI attaches to the proceeds or within 20 days thereafter

Question 14

Debtor’s name change and FS

Answer 14

If a debtor CHANGES his name, resulting in a FS that is seriously misleading, the FS will still be effective to perfect SI, but only for an additional FOUR MONTHS after the name change, unless the SP files an amendment to the FS within that four month period

Question 15

Debtor moves to another state

Answer 15

SP must file a new FS in Debtor’s new state within four months of Debtor’s move

Question 16

Five year rule for FS

Answer 16

A filed FS is effective for five years from date of filing

Question 17

Continuation statement

Answer 17

A continuation statement must be filed within SIX MONTHS BEFORE the five-year period expires

This extends the original FS for another five-year term from the date the FS would have become ineffective

Question 18

Without continuation statement

Answer 18

FS will lapse if it expires without a continuation statement being filed

§ Upon lapse, the FS becomes ineffective and the SI perfected by the FS becomes unperfected

Question 19

Perfection through possession

Answer 19

SI is perfected if the SP, or a third-party authorized by SP, takes possession of the collateral

Applies only if the collateral is:
(1) tangible negotiable documents,
(2) goods,
(3) instruments,
(4) money, or
(5) tangible chattel paper

Question 20

Perfection through control

Answer 20

SI is perfected if the SP takes control of the collateral

Applies only if the collateral is:
(1) an investment security,
(2) rights to a letter of credit,
(3) a deposit account, or
(4) an electronic chattel paper

Question 21

Automatic perfection

Answer 21

A PMSI in CONSUMER goods perfects upon attachment and remains effective permanently

Question 22

Exception to automatic perfection

Answer 22

Exception: consumer goods such as motor vehicles and fixtures not subject to automatic perfection (must file to perfect)