Perfection

Question 1

When can you perfect a security interest?

Answer 1

Only AFTER attachment has occurred

Question 2

What is the most common method of perfection?

Answer 2

Filing a UCC-1 Financing Statement, a one page form to the Secretary of State.

Question 3

What must you include on Financing Statement?

Answer 3

1. Debtor’s name
2. Secured Creditor’s name
3. Description of Collateral
4. An authenticated record by the debtor specifying that same collateral (can be separate security agreement, does not need to sign financial statement itself).

Question 4

What if the collateral is a fixture? what must you add to the Financing Statement?

Answer 4

For a fixture filing, you need to record at the mortgage records of the county where the land is.
Also, must include:
1. Describe the real property with sufficient detail to support a mortgage,
2. State that it covers fixtures (check a box)
3. Identify the owner of the realty if other than the owner of fixture.

Question 5

How long is a Financial Statement effective for?

Answer 5

5 years, perfects any security interest in described collateral in any secured loan b/w creidtor and debtor

Question 6

What if the debtor’s name changes?

Answer 6

Name change doesn’t have any effect on existing collateral, but S.I. is not perfected on any collateral acquired 4 months after the name change.

Question 7

How do you acquire a continuation for your Financial Statement?

Answer 7

File a continuation statement in the same office where the original statement was find ONLY within 6 months prior to expiration.

Question 8

Where must you file the Financing Statement? (which state)

Answer 8

The state where the debtor is!
Individuals: domicile
Registered organizations: state of registry.

Question 9

What if the debtor moves to a new state?

Answer 9

Creditor has four months to discover the move and refile at the new SoS. If not, the FS filed in the previous state is retroactively ineffective as to other creditors.

Question 10

How do you perfect a security interest for a car?

Answer 10

Cover the car by a CERTIFICATE OF TITLE, perfected only by applying to the DMV to have a lien noted on the certificate of title.
Note: cars in a dealer’s inventory are treated as inventory.

Question 11

Can you perfect a Security Interest via just possession?

Answer 11

Yes, possession satisfies both the writing requirement for attachement AND the perfection step.

Question 12

When is possession a superior claim to filing?

Answer 12

1. Possession superior perfection to filing for instrument or chattel paper

Question 13

When is possession via an agent valid?

Answer 13

When there is an authenticated acknowledgment by the agent

Question 14

When is there an automatic perfection upon attachment?

Answer 14

For Purchase money security interest in consumer goods!

Question 15

What is a Purchase money security interest?

Answer 15

It is a security interest that secures repayment of whatever portion of the loan (usually 100%) ACTUALLY USED to PURCHASE the collateral (consumer goods only)

Question 16

How do you perfect an interest in commercial deposit account?

Answer 16

EXCLUSIVELY via control of the account.

Question 17

How can you control a deposit account?

Answer 17

1. If the secured creditor is the bank where the deposit is held, it has control
2. Control agreement: in which the bank agrees to follow the secured creditor’s instructions with respect to the money in the account.
3. The creditor can become the bank’s customer with respect to the deposit account by adding the creditor’s name to the account.

Question 18

When is control used for perfection other than for deposit accounts?

Answer 18

Control is an alternative method for investment property, which beats out ANY other way

Question 19

What is a certified security? How do you transfer control to creditor?

Answer 19

If an individual’s stock or bond holding is represented by a paper certificate, then transfer possession of the certificate to the creditor and proper indorsement or re=registration in creditor’s name to transfer control.

Question 20

What is a uncertified security? How do you transfer control to creditor?

Answer 20

Transfer it via “delivery” by transfering issuer’s books into the creditor’s name. Usually electronic booking. VERY rare.

Question 21

What are Indirect holdings? How do you transfer control?

Answer 21

They are securities held through broker in a securities account. Control is transferred the same way as a deposit account:

1. If the secured creditor is the bank where the deposit is held, it has control
2. Control agreement: in which the bank agrees to follow the secured creditor’s instructions with respect to the money in the account.
3. The creditor can become the bank’s customer with respect to the deposit account by adding the creditor’s name to the account.

Question 22

How does perfection occur for proceeds of collateral?

Answer 22

Automatic attachment to proceeds of collateral. And if interest in original collateral perfected, automatic interest in proceeds are also perfected automatically, with a 20 grace period.

Question 23

How does perfection continue for proceeds without any further action?

Answer 23

1. The original financing statement might describe the proceeds (usually by “inventory” or “equipment”)
2. If the proceeds are identifiable cash proceeds, continuous automatic perfection: “money, checks, deposit accounts, or the like”
3. Perfection as a matter of law

Question 24

When is perfection as a matter of law?

Answer 24

IF:

1. the original security interest was perfected by filing
2. the proceeds are collateral in which a security interest can be perfected by filing in the same office as the original filing
3. the proceeds were not acquired with cash proceeds