Secured Transaction Flashcards
UCC Article 9
Article 9 of the Ucc applies when a creditor retains a security interest in a debtors personal property or fixtures.
Security Interest
A security interest occurs when the debtor uses collateral to secure a loan from a creditor who has the ability to foreclose on the collateral and sell the property to satisfy the debt.
Lease
A transaction will be considered a security interest as opposed to a lease if the rental obligation is not terminable by the lessee and at the end of the lease, the lessee has an option to purchase the goods for no or nominal consideration.
Collateral
Collateral refers to the property in which the security interest is created. It also extends to the proceeds that can be identified from the property. The collateral could be goods, consumer goods, inventory, equipment, accounts, and proceeds from the collateral.
- Goods
Goods refers to all the moveable property that is available when the security interest attaches
- Consumer Goods:
Consumer goods refers to the property that is mainly for personal, family, or household use
- Inventory:
Inventory includes the goods that an individual has for sale or lease.
- Accounts:
A security interest in a debtor’s account gives the creditor the right to possess any property that has been or yet to be paid. The creditor can also receive payment directly from the person who owns debtor.
- Equipment
goods that are used or bought for the use of a business.
- After acquired property clause
A security interest that not only on the present property butt also in property that the person will obtain in the future.
- Proceeds of the collateral
Whatever is received upon the sale, exchange, collection, or other disposition of collateral or proceeds.
Attachment:
Under Article 9, attachment occurs when there is a valid security agreement, the debtor has more than mere possession of the collateral, and the creditor extends value for the collateral.
Security agreement
A valid SA requires a document signed by the debtor, which identifies the SP and the debtor, and sufficiently describes the collateral
- Buyer in the ordinary course
when a person buys a good from a person, without knowledge of another person’s interest in the good, from a person who regularly sell these goods and the sale was in the ordinary course of business.
Perfection:
Generally, there are three different methods in which a security interest may be perfected: 1. Filing of a financing statement or security agreement with the state; 2. Taking possession of the items, 3. Control
Priority
Generally, a perfected security interest has priority over a conflicting unperfected security interest in the same collateral
Fixture
goods that have become so related to real property that an interest in them arises under real property.
- Fixture filing
In order to perfect a fixture, a fixture filing must be made in the office where a mortgage on the real estate would be filed.
PMSI:
In some situations, a security interest is automatically perfected upon attachment. The most common is a PMSI in consumer goods.
Accessions
Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods are not lost.
Repossession
After default, a secured party may: 1) take possession; and 2) without removal, render equipment unusable and dispose of collateral on a debtor’s premises.
Rights of account debtors:
A secured party has the right to collect a debt directly from account debtor. - Once the account debtor receives notification of an assignment, the debtor can no longer discharge by payments to assignor (the original creditor).
