Priority Flashcards
What’s the core question here?
Is this stuff important?
When more than one party stakes a claim to the same collateral, who gets to take first, second, third, etc?
Very - commonly tested.
Must claimants with priority share their interests in the collateral with subordinated claimants?
No - each claiming is entitled to satisfaction IN FULL before a subordinated claimant is entitled to take.
PIGGY PIGGY PIGGY!
What are the types of creditors?
1) Attached Unperfected Creditor (AUPie)
2) Lien Creditor (LC)
3) Perfected Attached Creditor (PAC)
4) Buyer in Ordinary Course (BIOC)
5) Non-Ordinary Course Buyer (NOCie)
6) General Unsecured Creditor (GUC)
What is an Attached Unperfected Creditor?
An Art. 9 creditor who creates an enforceable security interest (i.e. it has attached), but either never bother to perfect or tries in vain to do so (e.g. by filing in the wrong place)
What is a Lien Creditor?
The general unsecured creditor who goes to court to get a judicial lien on the collateral
What is a Perfected Attached Creditor?
An Art. 9 creditor who succeeds in attaining perfection.
What is the Non-Ordinary Course Buyer?
Someone who purchases the collateral outside the ordinary stream of commerce (e.g. buying a guitar from a mechanic)
What is a Buyer in Ordinary Course?
Someone who purchases the collateral from a merchant’s inventory (a guitar from a guitar store)
What is the General Unsecured Creditor?
The lender who never bothered to take the collateral to secure the loan
How do these characters generally rank?
1) Buyers in ordinary course
2) Perfected attached creditors
3) Lien creditors
4) Non-ordinary course buyers
5) Attached unperfected creditors
6) General unsecured creditors
What’s the good news for attached unperfected creditors?
What’s the bad news? To whom will the attached unperfected creditor lose?
Their interests are enforceable against the debtor and will defeat any subsequent (later-in-time) attached unperfected creditors as well as any general unsecured creditors.
Attached unperfected creditors will lose to Perfected attached creditors and lien creditors, as well as ANY BUYER without knowledge of the security interest (essentially, BFP’s).
What’s the general rule for for Perfect Attached Creditors?
Exceptions?
They defeat everybody.
1) The PAC who perfected (filed) first
2) Certain PMSI holders
3) Buyers in Ordinary Course (always takes free of a perfected security interest in seller’s inventory)
What happens when a secured party files early (say, during preliminary loan negotiations) and attaches later?
Priority relates back to the early filing date - the creditor gets the benefit of her early filing.
What is an After-Acquired Collateral Financier?
A secured creditor who takes as collateral a security interest in all of Debtor’s equipment/inventory/etc., whether now held or hereafter acquired.
In other words, the holder of a floating lien
What is a Purchase-Money Security Interest?
A security interest in the very goods the debtor sought a loan to obtain. (An extension of value by a lender who takes as collateral a security interest in the very item that its loan enables the debtor to acquire)
