R7 Secured Trans 1 (S)

Question 1

Secured Transactions

Answer 1

A credit transaction where a debtor buys something from a creditor or secured party on credit. The creditor wants to be able to be able to rely on something other than the debtor’s promise to ensure to payment

Applies to security interests in personal property or fixtures

Question 2

Security Interest (Collateral)

Answer 2

A limited right in specified personal property of the debtor that alows the creditor to take the property if the debtor fails to fulfil the credit obligation

Effective between debtor and creditor upon attachment

Effective against third parties upon attachment Article 9 does not apply to land, wage claims, etc

Question 3

Purchase Money Security Interests (PMSI)

Answer 3

Has priority over all other types of security interests in the same colateral if it is properly perfected

A creditor sells the colateral to the debtor on credit, retaining a security interest for the purchase price

The creditor advances funds used by the debtor to purchase the collateral

Question 4

Types of Collateral Goods

Answer 4

Consumer goods - “personal use”

Inventory - goods held for sale or lease

Equipment - bought for use primarily in business

Whether goods are consumer goods, inventory or equipment is determined by how the debtor uses them, not by the nature of the goods

Question 5

Types of Collateral - Intangible Collateral Accounts

Answer 5

An account is any right to payment for goods, services, real property, or use of credit card, not evidenced by an instrument or use of chattel paper

Question 6

Types of Collateral Investment Property

Answer 6

Includes stocks, bonds, mutual funds, and brokerage accounts containing such items

Question 7

Types of Colateral Proceeds

Answer 7

Whatever is received upon the sale, exchange, collection, or other disposition of collateral

Question 8

Duties of Secured Party

Answer 8

Duty to file or send a termination statement when the debt it paid, confirm the debtor the unpaid amount left on the secured debt, and to use reasonable care to preserve any colateral in the secured party’s possession

Question 9

Three Requisites for Attachment

Answer 9

1. The parties must have an agreement creating the security interest evidenced by either an authenticated record of the security agreement or the creditor taking possession or control of the collateral
2. Value must be given by the secured party in exchange for the security interest
3. The debtor must have rights in the collateral

Question 10

Authenticated Record

Answer 10

Includes not only old fashioned written security agreements, but also intangible records such as computer files

Record is authenticated through a written signature or by any electronic mark made with the intent to identify the authenticating person and adopt the agreement

Question 11

Property in which Debtor Acquires Interest in Future

Answer 11

After-Acquired property is permissible

Most often used with inventory and equipment or consumer goods

Question 12

Attachment

Answer 12

Establishes the secured party’s right to the collateral vis-a-vis the debtor

Question 13

Methods of Perfection

Answer 13

1. Fining
2. Taking possession
3. Control
4. Automatic Perfection
5. Temporary Perfection

Question 14

Timing of Perfection

Answer 14

Perfection of a security interest cannot be completed until it has been attached

Can file for perfection before attachment

Question 15

Perfection by Filing

Answer 15

A security interest can be perfected as to al kinds of colateral except deposit accounts and money by filing a financing statement containing Perfection by Filing Continuation Statement Perfection by Taking Possession of Property Perfection by Control the name and mailing address of the debtor and secured party and the colateral covered by the financing statement. The debtor must authorized the filing with the secretary of state and is effective for 5 years

Question 16

Continuation Statement

Answer 16

Filed to renew a financing statement for an additional 5 years

Question 17

Perfection by Taking Possession of Property

Answer 17

A secured party may perfect a security interest in most types of colateral simply by taking possession of the colateral (pawn shop)

Question 18

Perfection by Control

Answer 18

A security interest in investment property may be perfected when a secured party has control of an item of investment property when the secured party has whatever steps are necessary to have the investment property sold without further action from the owner

Question 19

Automatic Perfection

Answer 19

A security interest is perfected simply by the attachment of the security interest without any added requirements
Small scale assignment of accounts

Question 20

PMSI in Consumer Goods Automatic Perfection

Answer 20

A PMSI arises when the creditor either sells the colateral to the debtor on credit and reserves a security interest or advances the funds that are used to purchase the colateral and reserve a security interest