Perfection of Security Interest

Question 1

Five Methods of Perfection

Answer 1

(1) Filing; (2) Taking possession of the collateral; (3) Control; (4) Automatic Perfection; (5) Temporary Perfection

Question 2

Timing of Perfection

Answer 2

Must occur AFTER attachment (because a security interest isn’t enforceable against any party until it has attached to the collateral). But you can do all the steps required for perfection before attachment so once it attaches it immediately perfects.

Question 3

Limited Effect of Perfection

Answer 3

Nonpossessory security interest may still be subordinated to some types of adverse 3P claims even if perfected (e.g., to ordinary course of buyers of inventory or holders in due course of negotiable instruments)

Question 4

Effect of Perfection

Answer 4

Puts world on record or constructive notice of the secured party’s existence and protects the secured party from competing creditors

Question 5

Perfection by Filing

Answer 5

Allowed for all collateral except deposit accounts and money; must file a financing statement containing name/address of creditor and debtor, indication of collateral covered, and if real property is involved (like timber or fixtures or minerals), a description of that property and the name of the record owner
Financing Statement is called a UCC-1
You cannot fuck up the debtor’s name

Question 6

Perfection by Filing: Location

Answer 6

Filing is done with the Secretary of State in the state where debtor is located (principal place of residence for individual, state under whose laws it is organized for business)
Exception: If collateral is realty like timber, fixtures, or minerals, the statement must be filed locally in the country where the realty is located

Question 7

Perfection by Possession

Answer 7

Secured party must take possession of the collateral; does not work for intangibles

Question 8

Perfection by Control

Answer 8

Security interests in investment property, nonconsumer deposit accounts, and electronic chattel paper may be perfected by control. pp. 10-11

Question 9

Automatic Perfection (PMSIs in consumer goods except motor vehicles)

Answer 9

A9 provides that the security interest is perfected simply by the attachment of the security interest; PMSIs get special treatment because they stimulate the economy and encourage economic growth and consumerism

Question 10

Automatic Perfection for Investment Property

Answer 10

Occurs when (1) debtor is a securities intermediary, (2) if the debtor purchased the asset thru a securities intermediary and hasn’t paid, or (3) if one who deals in securities or similar assets purchases a certified security from another such dealer under an agreement calling for delivery against payment

Question 11

Temporary Perfection

Answer 11

A security interest in proceeds from original collateral is continuously perfected for 20 days from the debtor’s receipt of the proceeds; security interest becomes unperfected on the 21st day after the debtor’s receipt of the proceeds unless the statutory requirements are complied with

Question 12

Continuation of Perfection of Interest in Proceeds

Answer 12

Even beyond the 20-day period that original collateral is perfected after the debtor’s receipt of the proceeds, the security interest will continue to be perfected if (1) the interest was perfected by filling and the security interest for the proceeds would be filed in the same place; (2) the proceeds are identifiable cash proceeds, or; (3) the security interest in the proceeds is perfected within the 20-day period