PP#2

Question 1

Personal Property Security Agreement (PPSA)

Answer 1

Provincial Legislation in Canada that registers and regulates the creation and process of security interests in all personal property (within the respective jurisidiction).

Question 2

Collateral

Answer 2

Collateral IS the security interest. It is what a debtor would lose if they fail to make payments on a loan agreement with their creditor. Collateral is the building block, or the key ingredient of a security agreement.

Question 3

Assignment

Answer 3

This is when you give away your rights to something. Typically the rule with assignment is, you can give away benefits but you cannot give away obligations.

Question 4

What is a secured debt/security interest

Answer 4

A creditors back up plan.

In the event that I cannot be paid my #1 priority, which is money, I will look to seize upon my my #2 priority, which is my secured interest.

If I loan you $60,000 and you cannot pay it back subject to the conditions of our contract, I can then seize your Lexus that you have placed as collateral.

Question 5

Nemo Dat Quod Non Habet

Answer 5

You cannot put up an item up as security interest if you actually do not own it. For example, I can not use the Eiffle Tower as collateral in a loan agreement because I do not own the Eiffle Tower.

Simply: You cannot give what is not yours.

Question 6

How do you get a General Security Agreement?

Answer 6

There are three steps to obtaining a GSA.

1. Agreement
2. Attachment
3. Perfection

Of all three of these steps, the most important step to obtain as a creditor if you want to protect yourself from other credtiors, is perfection. Perfection occurs as a result of registration and registration is a process that is done quickly and with ease. Even if you acquire agreement and attachment later than another party, you still have a secured interest in the personal property because you registered.

Question 7

Universal Commercial Code (UCC)

Answer 7

In America, secured transaction law is federal jurisdiction. The UCC acts as a the Alberta Personal Property Security Act except it pertains to the entire United States as opposed to one province/state. Provincial PPSA’s are all similar though and are based around being as similar to the UCC as possible.

Question 8

Agreement

Answer 8

This is the signing of the contract that states the terms and conditions, it states the amount of money/valuable that will be loaned, the payment conditions and the collateral that is to be secured.

Question 9

Attachment

Answer 9

This is when the value is actually given to the debtor from the creditor.

Question 10

Perfection

Answer 10

This is the registration of your security interest in the asset. This is registered under the PPSA and is usually done so in a financing statement. Perfection can also occur in the form of possession as well, such is the case in pawn shops and other agreements.

Question 11

Why is Perfection Important?

Answer 11

If you only have attachment in an agreement, you only have a claim to the asset strictly against the debtor, however if you have perfection, your claim to the asset is the strongest against ALL other creditors.

Question 12

Civil Enforcement Act

Answer 12

This act allows you to the right to seize your security interest in the event of a default. It stipulates that the debtor has a equity of redemption for a reasonable period of time to repay the debt and obtain their property back.

Question 13

What if you wanna sell seized collateral?

Answer 13

You must give notice to the debtor that you are planning to sell their item. You can sell it in a public auction in order to show you are attempting to sell at a fair market price. Or you can sell the item in a private sale so long as the process is commercially unreasonable.

Question 14

Bankruptcy Insolvency Act (BIA)

Answer 14

If someone does not have the money to pay back creditors, they can declared or pushed into bankruptcy by the bankruptcy insolvency act. This occurs when debtors owe over $1,000. This is when a trustee in Bankruptcy will take over all your assets and begin the process of repaying creditors and clearing your name.

Question 15

Bankruptcy Insolvency Act, Priority List

Answer 15

This is why we have secured creditors. When somebody goes bankrupt under the BIA there is a list of creditors that want to be paid. This is the order of priority for this list.

1. Secured Creditors - people using the PPSA
2. Preferred Creditors - (Outside taxes to revenue Canada, funeral expenses)
3. Unsecured Creditors - People who are owed money who do not have protection as collateral under the PPSA

You have RRSP and Pensions are exempt from seizure in bankruptcy.

Question 16

Creditor Obligations for Discharge

Answer 16

Depending on how much money you’ve paid towards your creditors, you may or may not be discharged from your credit obligation in bankruptcy. Some fines may survive, it is all at the discretion of the bankruptcy trustee.

Question 17

Floating Charge

Answer 17

a security interest in an underlying asset or groups of assets that are subject to change in quantity and value. If the debtor defaults on a floating charge, the creditor is allowed to look at the debtors assets over which the floating charge exists and take what they like.

Question 18

Chattel Mortgage

Answer 18

A mortgage on chattels as opposed to real property. The rules are quite similar.

Question 19

Book Debt

Answer 19

An assignment of a monetary promise to pay (such as a promissory note) from one creditor to another creditor, such that the former creditor is not indebted or has at least partially removed his debt to the latter creditor.