Secured Transactions Flashcards
When does a security interest attach; or become legally enforceable?
Secured interest must be supported by consideration given. Debtor must actually own the rights to the collateral or have possession. Secured interest much be recorded
What are the characteristics of perfection of interest in a secured transaction?
Gets higher priority over others claiming rights to collateral after the perfection takes place
Attachment must take place BEFORE perfection
How does perfection occur in a secured transaction?
By filing a financing statement
By possessing the collateral
When does automatic perfection occur in a secured transaction?
Store sells a consumer good on credit - Store retains security interest
A bank finances the purchase of a consumer good - Bank retains security interest
What are the priority rules for payment in a secured transaction?
If two parties are perfected; then the first one to file wins
If neither party is perfected; then the first one to attach wins
What are the advantages of a creditor holding a lien in a secured transaction?
Creditor holds priority over claims to collateral vs. unperfected security interests
Beats perfected security interests filed after lien attachment
Exceptions: Purchase money security interest; which has a 10 day grace period to be filed
Buyers purchasing in the ordinary course of business are immune from security interests held by merchants
How long are financing statements good for? When may they be renewed?
5 years. Renewed within 6 months of expiration
Auto-perfection of security interest only applies to what type of goods?
Consumer goods
When is a security interest effective against a 3rd party?
When perfected OR 3rd party is aware of security interest
When is auto perfection not effective?
Against a good faith purchaser for value who buys from a consume lr for consumer use
When does a security agreement not need to be in writing to be enforceable
Secured party holds collateral
Does UCC cover security interest in after acquired commercial torts?
No
Is a purchaser subject to prior perfected security interest if purchaser was aware merchant was selling goods in violation of security agreement?
Yes
When is a PMSI agreement superior to prior perfected interests?
If perfected within 10 days of attachment AND notice given to other secured parties
When are consumer to consumer purchases subject to security interests?
If security interest is perfected before sale
