Perfection of SI Flashcards
Perfection of SI
The process that stakes the secured party’s claim, so that the secured party might have PRIORITY over a later party
Methods of Perfection
(1) Filing
(2) Possession
(3) Control
(4) State’s Certificate of Title Law
(5) Automatic Perfection
Perfection by Filing: In General
Must file FINANCING STATEMENT in central filing office
Perfection by Filing: What Must a Financing Statement Contain?
(1) Debtor’s LEGAL name
(2) Secured party’s name
(3) Description of the collateral
Perfection by Filing: Where to File?
In the central filing office in the state where the DEBTOR IS LOCATED
Often the secretary of state’s office
Perfection by Filing: What Type of Collateral Can Be Perfected This Way?
All collateral, except:
(1) Deposit account;
(2) Money;
(3) Letters of credit;
(4) Collateral subject to other perfection methods
Perfection by Filing: Authorization
Debtor must authorize a financing statement in an authenticated record
Does NOT have to sign it
Secured party must deliver the financing statement to the debtor WITHIN 30 DAYS of filing
Perfection by Filing: Effective Date of Filing
Effective upon delivery to filing office and tender of filing fee
Perfection by Filing: Length of Perfection
Effective for 5 YEARS
Perfection by Filing: Errors in Financing Statement
Minor errors in a financing statement do not affect perfection unless they make the financing statement SERIOUSLY MISLEADING
If there is an error in debtor’s name and a search for the correct name of the debtor would uncover the financing statement with the error, the error is NOT seriously misleading
Perfection by Filing: Unjustified Refusal to Accept by Filing Office
Financing statement treated as having been filed
Perfection by Filing: Filing Office’s Incorrect Indexing of a Financing Statement
If the filing office indexes the financing statement incorrectly, that has NO EFFECT on perfection
Perfection by Filing: Continuation Statement
May be filed within last 6 MONTHS before financing statement lapses to continue financing statement for another 5 years
Perfection by Filing: What Happens if a Financing Statement Lapses?
Secured party loses perfection
Secured party may file new financing statement to re-perfect, but might lose its place in a priority contest
Perfection by Filing: Termination Statement
Terminates effectiveness of a financing statement
Used for when the obligation is paid back
Perfection by Possession: In General
SI in TANGIBLE collateral may be perfected if secured party takes possession of the collateral
Perfection by Possession: Collateral That Can Be Perfected By Possession
(1) Money
(2) Goods
(3) Instruments
(4) Negotiable documents
(5) Tangible chattel paper
Perfection by Possession: When is the Interest Perfected?
As soon as the secured party has possession
Perfection by Possession: How Long Does Perfection Last?
SI remains perfected as long as the secured party retains possession
Perfection by Control: In General
Secured party may perfect an SI in specific INTANGIBLE collateral by taking control of that collateral
Perfection by Control: Collateral That Can Be Perfected By Control
(1) DEPOSIT ACCOUNTS
(2) Investment property
(3) Electronic documents
(4) Electronic chattel paper
(5) LETTER OF CREDIT RIGHTS
Perfection by Control: Exclusive Method of Perfecting SI in….
(1) Deposit accounts
(2) Letter of credit rights
Perfection by Control: Three Ways to Obtain Control Over a Deposit Account
(1) SECURED PARTY IS THE BANK that has the deposit account
(2) The secured party, the bank, and the debtor AGREE IN AN AUTHENTICATED RECORD that the lender secured party has control over the deposit account
(3) SECURED PARTY BECOMES BANK’S CUSTOMER with respect to the deposit account
Perfection Under a State Certificate of Title Statute
MUST perfect by noting SI ON THE CERTIFICATE OF TITLE
Applicable to cars, motorcycles,or other vehicles that have a title
Filing, Possession of the car, or possession of the title are insufficient to perfect in most cars
