Purchase Money Security Interest

Question 1

In terms of priority, where do purchase money security interest stand?

Answer 1

Generally, PMSIs have priority over prior perfected security interests if the PMSI is properly executed.

Question 2

What is a PMSI?

Answer 2

A PMSI is either:

1. A security interest held by the seller of collateral to secure payment of all or part of the price; OR
2. A security interest of a person that gives value to a debtor so that the debtor may acquire rights in or the use of collateral.

Question 3

As it pertains to inventory, what priority level does a PMSI have?

Answer 3

A PMSI in inventory collateral has priority over a conflicting security interest in the same collateral IF THE PMSI IS PERFECTED at the time the debtor receives possession and notice is provided to prior creditors.

Question 4

Does an unperfected PMSI in inventory have priority of a perfected security interest?

Answer 4

An unperfected PMSI in inventory will NOT have priority over a perfected security interest in the same collateral.

Question 5

Does an unperfected PMSI in inventory have priority of a perfected security interest?

Answer 5

An unperfected PMSI in inventory will NOT have priority over a perfected security interest in the same collateral.

Question 6

What are the priority rules of a PMSI in non-inventory collateral?

Answer 6

A PMSI in non-inventory collateral (regular goods) has priority over a conflicting security interest in the same collateral if the PMSI is perfected at the time the debtor receives possession of the collateral or within 20 days thereafter. (i.e., the debtor has a 20 day grace period to file upon receipt of the collateral)

Question 7

What are the priority rule of a PMSI in Consumer goods?

Answer 7

Remember, a PMSI in consumer goods perfects automatically upon attachment. (NO FILING REQUIRED)