Priority Rules

Question 1

Conflicts arise among 3 major creditors

Answer 1

1) general creditors (unsecured)- one who has a claim, including a judgment, but who has no lien or SI with respect to the property in question
2) judicial lien creditor- creditor who acquires a lien on the collateral by judicial process rather than by operation of law
3) secured creditor- three major types
- — those that have perfected
- —-those who have not (unperfected)
- —-those that have a perfected PMSI

Question 2

unperfected secured v. general creditors

Answer 2

a secured party will always prevail over a general creditor with respect to the debtor’s collateral

Question 3

unperfected v. judicial lien

Answer 3

-judicial lien creditor always has priority over an unperfected SI
if a judgment lien is acquired after attachment of a SI, the judicial lien creditor must not have knowledge of the SI at the time the lien attaches

Question 4

perfected v judicial lien

Answer 4

-judicial lien creditor is subordinate to a perfected SI

Question 5

PMSI v judicial lien

Answer 5

-if the secured party has a PMSI that perfects before or within 20 days after the debtor receives possession of the collateral, the perfection will revert back to the date the debtor receives possession for priority purposes

Question 6

advances

Answer 6

• amount of $ lent after the SA attaches
• advances made within 45 days after the person becomes a lien creditor are subordinate to the lien creditor UNLESS:
  1) advance is made without knowledge of the lien or
  2) is made pursuant to a commitment entered into without knowledge of the lien
• basically gives SP a 45 day window to advance money regardless of knowledge

Question 7

secured interest v. secured interest

Answer 7

general rule: first to file FS or perfect wins

Question 8

perfected v unperfected

Answer 8

the perfected interest takes over the unperfected interest regardless of the date of the SA was signed or the interest attched

Question 9

unperfected v unperfected

Answer 9

the “first in time, first in right” rule applies with the critical time being the time of attachment

Question 10

perfected v. perfected

Answer 10

• first to file or perfect has priority

- when both SI are perfected, priority date from the time of filing or perfection, whichever occurs first