Perfection of Security Interest Flashcards
Requirements for perfection?
1) attachment
2) perfection via authorized method
What are the 5 methods of perfection?
1) filing
2) taking possession of collateral
3) control
4) automatic perfection
5) temporary perfection
When is perfection effective?
When perfection method executed AND attachment occurs
When might perfection be automatic?
For PMSIs in consumer goods; perfected as soon as PMSI attaches (except for motor vehicles)
What is perfection by taking possession (pledge)?
Where perfection occurs by taking possession of collateral (most often tangible goods)
When is perfection by possession effective?
Moment security interest is possessed AND continues as long as possession retained
What collateral CAN’T be perfected via pledge?
1) general intangibles
2) deposit accounts
3) electronic chattel paper
4) certificate of title goofs
5) accounts
What collateral can be perfected by control?
security interests in investment property, nonconsumer deposit accounts (exclusively), and electronic chattel paper
How are nonconsumer deposit accounts perfected via control?
Bank automatically has control; otherwise, by 1) putting deposit in creditor’s name OR control agreement
How does perfection for motor vehicles work?
notation on state-issued certificate of title for vehicle (exception for dealers’ inventory)
When can perfection by filing be used?
For all collateral except deposit accounts AND money
What is perfection by filing?
where secured party files financing statement containing:
1) debtor’s name/address
2) secured party’s name/address AND
3) description of collateral
When a mistake regarding debtor’s name NOT seriously misleading?
If it would be discovered in a filing office search under debtor’s correct name using office’s standard search logic
What if debtor’s name changes?
Financing statement still good for 4 months
How must collateral be described for perfection by filing?
Must reasonably identify collateral (supergeneric IS OKAY)
What law governs perfection?
Generally, law of state where debtor located
Where is debtor located?
Individual: principal residence
Registered org.: state under whose laws organized
Unregistered org.: principal place of business
What happens to collateral if debtor relocates?
Becomes unperfected 4 months after debtor’s move unless secured party files financing statement in new jurisdiction before period ends
What happens to collateral if transferred to new owner in different state?
Becomes unperfected 1 year after move unless secured creditor files financing statement in new jdxn before periods ends
What happens if collateral perfected via possession moves?
Remains perfects without further action so long as security interest also perfected by possession under laws of new state
What is a continuation statement?
Allows financing statement to remain effective for an additional 5 years
How long is a financing statement good for? When must a continuation statement be filed?
5 years; within 6 months before lapse
What is a termination statement?
terminates financing statement
When is a termination statement required?
Within 20 days of demand of debtor IF no outstanding debtor obligations and no commitment from creditor to make further advances OR debtor didn’t authorize filing of initial financing statement
What is perfection for proceeds?
Secured party automatically has perfected SI in any proceeds of collateral for 20 days following receipt of proceeds IF secured party has perfect interest in collateral
When will SI in process continue to be perfect beyond 20-day period?
If 1) proceeds are identifiable cash proceeds; 2) SI in original collateral perfected via filing, SI in this collateral would filed in same place, & proceeds not purchased with cash proceeds of collateral; OR 3) SI in proceeds perfected within 20-day period
What happens if debtor changes their use of the collateral?
Filed financing statement remains effective to perfect the security interest; creditor has NO DUTY to monitor
