Proceeds

Question 1

Temporary automatic perfection is for ____ days after collateral is sold

Answer 1

20 days

Question 2

What are the circumstances that a party must do to perfect collateral beyond the automatic 20 day period?

Answer 2

1. Amend if the initial financial statement is not broad enough
2. Cash proceeds rule: if collateral is sold, licensed, leased, or otherwise disposed of and generates cash, perfection continues indefinitely so long as they are identifiable
3. Same office rule: financing statement covers OG collateral, same office as OG filing statement, proceeds are not acquired with cash

Question 3

True or false: a financing statement that covers inventory is sufficient to perfect a security interest in accounts

Answer 3

True

Question 4

Bank has a security interest in all of a paper company’s inventory. The inventory is sold on credit, generating accounts. The accounts are proceeds of the inventory. Does the same office rule apply?

Answer 4

Yes! Both the inventory and accounts would be perfected by filing in the same office and the accounts were not acquired with cash proceeds.

Bank will be perfected in the accounts without filing a new financing statement.