Secured Transactions

Question 1

1) Secured Transactions Intro for ALL essays - Article 9 *
2) Did X have a security interest?
3) Attachment **
4) Perfection*

Answer 1

1) Article 9 applies to all security interests in personal property or fixtures by contract. Personal property become collateral when subject to a security interest. A security interest must attach to be enforceable.
2) For a security interest to exist, there must be a secured party (lender), who offers to give a loan to a borrower (the debtor) who offers property in which debtor has an interest (collateral) as security. [Specify type of good]
3) A security interest must attach to be enforceable. Attachment occurs when value has been given, the debtor has rights in the collateral, the debtor grants the creditor security in the collateral, and the parties sign a written security agreement which reasonably describes the collateral.

NOTE: A security interest can be created in after acquired property. (Collateral the debtor doesn’t own at time of agreement). The agreement does not need to specifically reference to be effective.

Attachment is a prerequisite for perfection. A security interest should be perfected to provide notice to others and to preserve rights against other creditors, who also have an interest in the good.

Perfection can occur by filing a financing statement with the appropriate gov.agency (ie PMSI in equipment /inventory, a regular security interest in consumer goods)

A PMSI in consumer goods (besides a vehicle) is automatically perfected upon attachment w/o filing a financing statement.

Question 2

Classification of Collateral: Goods (based on how debtor uses goods)***

Answer 2

Consumer Goods: goods used or brought for use primarily for personal, family or household purposes.

Inventory: goods other than farm products held by a person for sale or lease to be furnished under a contract of service.

Farm Products

Equipment: Goods other than ↑ ( i.e. machines used in business)

Question 3

***PMSI - Money from lender used to purchase collateral

Answer 3

A PMSI is a particular type of security interest, taken in a specific good to secure the purchase price of that
good.

A PMSI in consumer goods (besides a vehicle) is automatically perfected upon attachment w/o filing a financing statement.

Question 4

Judgment Lien Creditor

Answer 4

A lien creditor is a creditor who acquires a lien through the judicial process such as via attachment or levy.
JLC has priority if its lien is established before a security interest is perfected.

Question 5

Sale of Collateral

Answer 5

A security interest survives the sale of collateral, unless there is an authorized sale to a buyer or there is a sale to a buyer in the ordinary course of business

Question 6

Priority of Security Interests

Answer 6

1. Seller’s perfected PMSI
2. Lender’s perfected PMSI
3. Other secured creditors (first to file/perfect)
4. Lien Creditors (JLC subordinate to secured creditor who perfects before the lien is acquired, priority if its lien is established before a security interest is perfected)
5. Unsecured Creditors (didn’t attach)