Secured creditors Flashcards
Purchase money security interest
1) Seller who sold the goods (collateral) to the debtor on credit and buyer granted seller a SI in the goods (CLTL);
OR
2) Creditor that lent the money to the buyer to enable him to buy the collateral if the money is in fact so used and B granted C a SI in the goods (CLTL)
PMSI in consumer goods = born perfected (perfection upon attachment)
Other ways to perfect: 1) filing a finance statement 2) creditor taking pzn of the goods
Unsecured creditors
A valid security interest is required
SI
Perfected security interest
Only those who have perfected their security interest
PSI
Perfected purchase money security interest
PPMSI
Sppmsi
SPPMSI
Value
A binding commitment to extend credit or the extension of immediately available credit whether drawn upon or not.
Authentication
Means the debtor signed or executed a security agreement.
Doesn’t have to be full signature, can be a symbol as long as the authenticating person has the present intent to adopt or accept a record.
Not necessary to authenticate if the creditor has possession or control of the collateral.
Security agreement
-Must provide a description that reasonably identifies the collateral.
(reasonably identifies if the SA describes the collateral by specific listing, category, or type defined in UCC / supergeneric description not sufficient)
-Doesn’t have to be in specific form (except for description of collateral)
Hereafter Acquired Clause
Allows parties to create a SI that can attach both to existing personal property and hereafter acquired personal ppty of debtor
Aka “floating lien” - SI has nothing to attach to at moment of creation; SI floats until the D has acquired rights in the collateral when it attaches automatically to the collateral.
SI
SI = V + R + Ad/PC/CC
SI includes HAC and/or PMSI
Ways to Perfect
1) Possession
Possession
- Creditor must possess or do it through a 3P
- A secured party can satisfy pzn requirement if the 3P authenticates a record acknowledging that it holds pzn of the collateral for the secured party’s benefit either before or after the person takes possession of the collateral.
* doesn’t apply if collateral is certificated securities and goods covered by a document
What collateral can be Possessed
1) Negotiable Documents
2) Goods
3) Instruments*
4) Money*
5) Tangible chattel paper
6) Certificated securities
*can only be perfected by possession
Temporary Perction
A SI in certificated securities, negotiable documents, or instruments is perfected for 20 days from attachment if creditor gives new value under an authenticated security agreement.
Automatic Perfection
I. PMSI in consumer goods (no cars; subject to cert. of title statutes)
II. Insignificant assignment of accounts or payment intangibles
III. Sale of a payment intangible or promissory note
AP = [PMSI (C)] + [Insig. Assgn. A/PI] + [S of PI & PN]
What to file?
1) Financing statement
2) Amendments
- for subsequent changes, amendments, or continuation statements
Financing Statement
- must be authorized by the debtor to be effective
- debtor automatically authorizes the filing of an initial FS by authenticating or becoming bound by a SA
- FS doesn’t have to be signed by anyone
Must have:
1) Debtor’s name
2) Secured party’s name
3) Description of the collateral (supergeneric ok)
- 4 months (name change)
- 5 years (continuation statement)
Where to file?
If Q about perfection of SI, then the GR is:
- The law of the jurisdiction where the debtor is located determines the perfection of SIs
Location of debtor
1) registered entities located in state of organization
2) non-registered entities located in state of chief executive office
3) Individuals located in state of principal residence
4) federally registered companies in the state federal law designates, if any, or in the state the fed. org. designates if authorized by fed law
5) foreign debtors located in D.C.
Exceptions to GR of debtor location as place to file
The law of the jurisdiction where the collateral is located governs the perfection issue in these situations:
1) Possessory security interest
2) Certificated securities
3) Fixture filings
4) Timber to be cut filings
5) As-extracted Collateral filings
6) Agricultural liens
(If question 2)
What is effect of perfection? Or which creditor gets collateral?
Law of jurisdiction where debtor is located governs the following situations: general intangible and quasi-tangible property
1 Possessory SI 2 Tangible negotiable documents 3 Goods 4 Instruments 5 Tangible chattel paper 6 Money 7 Certificated securities 8 Fixtures 9 Timber 10 Agricultural liens 11 As Extracted Mineral
Goods under certificate of title statutes
The local law of the jurisdiction under whose certificate of title the goods are covered governs perfection, the effect of perfection or non perfection, and the priority of a SI in goods covered by a certificate of title
Which state law governs?
Perfection = Debtor’s location ( except location of collateral if PCFTAA)
Priority = Debtor’s location if GI and QT;
location of collateral if PTGITMCFTAA
