Perfection of Security Interest Flashcards
What is attachment?
- When a security interest becomes enforceable against the debtor w/ regards to the collateral.
- It is a precondition for perfection
What are the available methods for perfection?
1) Filing
2) Possession
3) Control
4) Alternative Perfection Systems
5) Automatic Perfection
What are the required contents for a financing statement?
1) Name of the debtor
2) Name of the Secured Party
3) Description of the collateral
What is required for a filing?
Must be filed in the central financing office of the appropriate state where the debtor is located.
What types of property can’t be perfected by filing?
- Deposit Accounts
- Money
- Letters of credit
- Collateral subject to other collection methods like cars and airplanes
What is the appropriate filing location for a corporation?
Where they are incorporated or registered
What is the appropriate filing location for an individual?
Principal residence except when its real property then you file in the situs.
What does the debtor have to do with regards to the filing statement?
The debtor must authorize the filing statement.
Can be done when they authenticate a security agreement because this authorizes the debtor to file a financing statement.
What is the result if a lender fails to obtain authorization to file a security agreement?
secured party can be liable for actual and statutory damages.
What is required for the name of the debtor?
- must be the correct legal name
Corporations: name in the articles of incorporation or last legal name on record w/ the state
Individuals: non-expired drivers license or other state ID. Minority rule allows something other than this
How must the collateral be described?
- can cut and paste from the security agreement
- can include a super generic description
- doesn’t have to list that it includes after-acquired property.
What happens if a piece of collateral is described in the security agmt but not in the financing statement?
Then the party’s security is attached but not perfected.
When will an error in the financing statement affect perfection?
When it makes the financing statement seriously misleading.
- errors in the debtor’s name are almost always seriously misleading, but if a search would uncover the name then its notmisleading
How long does a financing statement last?
A financing statement lasts 5 years unless its continued.
How is a financing statement extended?
Through a continuation statement filed w/in 6 mos. before the financing lapses.
How do you void a financing statement?
Through a termination statement
What happens if you re-file a financing statement immediately after it expires?
You lose your place in priority.
How does one perfect a security interest in money?
Through possession.
When is perfection by possession available?
When the collateral is a tangible item.
What types of collateral can be perfected by control?
Intangible collateral: deposit accounts, investment accounts, letter of credit rights.
How are deposit accounts perfected?
Only through perfection by control
How are letter of credit rights perfected?
Only through control
What is an alternate perfection system?
A state certificate of title statute - cars & motor vehicles
- the security interest is placed on the certificate of title
When does automatic perfection occur?
- a PMSI in consumer goods except when a certificate of title statute applies
- a casual or isolated sale of accounts that aren’t all or a significant portion of the accounts
- Sale of Payment Intangible
- Sale of promissory note