Secured Transactions

Question 1

Lease v. Security Interest

Answer 1

Whether a transaction in the form of a lease actually creates a true lease or a security interest depends on the economic realities of the transaction, not the form of the transaction or the supposed intent of the parties.

Is there:

• interest to be paid?
• entitled to terminate the lease at any point prior to full performance?
• can Lender recover the asset?

Question 2

What is a secured transaction?

Answer 2

UCC 9 governs secured transactions. Allows lender or sellers of goods on credit, to perfect a chattel mortgage on the debtor’s personal property (Collateral) to secure repayment of the indebtedness in the event of a debtor’s default. If D defaults, the secured creditor with a perfected security interest is given preference over the debtor’s other creditors to repossess the collateral to satisfy debt