Perfection of Security Interest

Question 1

What is perfection and why do you attain it?

relate back note

Answer 1

Perfection = publicity!

1. Secured party “perfects” to put the world on record (constructive) notice of the secured party’s existence
2. Helps protect the secured party from competing creditors

Note: Art. 9 allows for early filing and later attachment, which “relates back” to filing date for priority purposes

Question 2

What are three ways a creditor can attain perfection?

Answer 2

1. By taking possession of the collateral (from the debtor)
2. Purchase Money Security Interests (PMSIs): security interest that enables a debtor to purchase the consumer goods (only) in question and get
   Note: UCC wants to encourage these transactions
3. Filing Notice: the secured party files notice of the security interest in the public records with the Secretary of State (where debtor is located) through a “FINANCING STATEMENT: stripped down version of security agreement with just enough info to allow other creditors to “follow-up” (i.e. debtor and creditor names/addresses; basic description of the collateral)

EXCEPTION: if collateral concerns timber, minerals, fixtures, etc. file where the land is