Priority

Question 1

What is the general rule as to which creditor has priority?

Answer 1

Generally first to file or perfect has first priority.

Question 2

Who has priority between secured creditors?

Answer 2

First creditor to file UCC-1 wins, EXCEPT control of investment property or possession of notes or chattel paper.

Question 3

What is a lien creditor?

Answer 3

Creditors who acquire right through judicial process

Question 4

Who wins between a lien creditor and secured creditor?

Answer 4

If the secured creditor’s interest is perfected before the lien arises, the secured creditor wins. If SI arise after the lien, then the lien wins.

Question 5

Who has a priority with a fixture filing?

Answer 5

Even if fixture filing was NOT made, perfection by any method (normal filing, vs UCC) is effective with respect to lien creditors.

Question 6

What is the rule for Buyers in Ordinary Course?

Answer 6

A perfected security interest follows collateral into the hands of a buyer (buyers who pay for collateral before perfect are unaffected by security interest)
*Inventory sold in the ordinary course of the debtor’s business is generally not subject to the debtor’s lender’s security interests.

Question 7

What is the PMSI Exception for non-inventory collateral?

Answer 7

If PMSI perfected within 20 days of the debtor’s receiving delivery of collateral, this beats all other secured creditors and lien creditors! (both in the PMSI collateral AND the eventual proceeds)

Question 8

What is the PMSI Exception for Inventory collateral?

Answer 8

To get super-priority in inventory, a PMSI creditor must do 2 things before the collateral is delivered to the debtor:

1. perfect the PMSI and
2. Notify any secured creditor with a filed perfected competing interest in after-acquired inventory in writing that PMSI has/expects to have PMSI priority in the described inventory

Question 9

When will PMSI get super priority over proceeds?

Answer 9

Only for instruments, chattel paper, and identifiable cash proceeds received on or before delivery to the buyers of the inventory.

Question 10

What happens to PMSI super priority when inventory is sold on credit?

Answer 10

When inventory is sold on credit, in exchange for a promise to pay later, an account, PMSI super priority in the account and its proceeds are CUT OFF!