Perfection

Question 1

Methods of perfection

Answer 1

(1) Attachment, and;
(2) (a) Filing of a financing statement;
(2) (b) Possession of the collateral, or;
(2) (c) Control of the collateral.

Question 2

Statutory perfection

Answer 2

E.g., a state statute requiring security interests in a motor vehicle to be noted on its certificate of title.

Question 3

Purchase money security interest

Answer 3

Only a PMSI in consumer goods is automatically perfected upon attachment.

A PMSI in other types of goods (e.g., inventory or equipment) or in cars is not—i.e., the seller must file a financing statement to perfect.

Question 4

Filing a financing statement

Answer 4

Can be used to perfect a security interest in any collateral except:

• A deposit account;
• Money, or;
• Letter-of-credit rights that are not a supporting obligation.

The financing statement, effective on the date of filing, must contain the following information:

(A) The debtor’s name, or an incorrect name that is not “seriously misleading”;

(B) The name of the secured party or a representative of the secured party, AND;

(C) The collateral covered by the financing statement.

Question 5

Control of the collateral

Answer 5

Can be used to perfect a security interest in:

• Investment property;
• Deposit accounts;
• Letter-of-credit rights;
• Electronic chattel paper, or;
• Electronic documents.

The security interest remains perfected only while the secured party retains control.

Question 6

Control of a deposit account

Answer 6

A secured party has control of a deposit account if:

(A) The secured party is the bank with which the deposit account is maintained;

(B) The bank, secured party, and debtor agree in writing to follow the instructions of the secured party, OR;

(C) The secured party becomes the bank’s customer with respect to the deposit account.

Question 7

Proceeds of sale of collateral

Answer 7

If a security interest in collateral is perfected, and the collateral is sold for cash proceeds, checks, or a deposit account, the secured party will have a temporarily perfected security interest in the proceeds for 20 days—unless it continues indefinitely under the same office rule.

Question 8

Accounts

Answer 8

A security interest in accounts may be perfected only by filing.

Question 9

Proceeds of sale of collateral: same office rule

Answer 9

Under the same office rule, a perfected security interest in proceeds may continue indefinitely when:

(i) the filed financing statement covers the original collateral;
(ii) the proceeds are collateral in which a security interest may be perfected by filing in the same office as the financing statement; and
(iii) the proceeds are not acquired with cash proceeds.