Secured Transactions

Question 1

WHAT THE FUCK IS A SECURED TRANSACTION

Answer 1

A secured transaction is a transaction intended to create a security interest in personal property or fixtures. It generally involves a sale on credit or a loan in which the seller or the lender obtains a lien on some or all of the debtor’s property as security for payment

Question 2

DEBTOR

Answer 2

The debtor is the person who owes payment or performance of the obligation secured

Question 3

SECURED PARTY

Answer 3

The secured party = the creditor is the lender, seller, or other person in whose favor there is a security interest

Question 4

SECURITY AGREEMENT

Answer 4

The security agreement is the agreement between the debtor and the secured party that creates the security interest

Question 5

SECURITY INTEREST

Answer 5

An interest in personal property or fixtures that secures payment or performance of an obligation.

Contingent property interest in the debtor’s collateral that the debtor grans to the creditor

When the contingency (default) occurs, the property interest springs to life and the creditor has rights in the debtor’s collateral

Question 6

COLLATERAL

Answer 6

Collateral is the property subject to a security interest. Property that the secured party can repossess upon default to ensure that the debt is paid

Question 7

PURCHASE MONEY SECURITY INTEREST

Answer 7

PMSI is a special type of security interest in goods. It can arise in two ways:

1. The secured party sells the goods to the debtor on credit and retains a security interest in the goods sold [Seller-Financed]
2. The creditor loans funds to the debtor to enable the debtor to buy specific collateral, and those funds are used by the debtor to acquire the specific collateral, and the creditor takes a security interest in that collateral [Finance-Financed] - someone other than seller is giving you money to buy an item and the third party takes a security interest in the property

Question 8

AFTER-ACQUIRED PROPERTY CLAUSE

Answer 8

A secured party will want want to obtain a security interest not only in debtor’s present property, but also in property that the debtor will obtain in the future

Question 9

FUTURE ADVANCE CLAUSE

Answer 9

A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement.

Question 10

ATTACHMENT

Answer 10

Steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor.

Once the security interest attaches, it is effective against the debtor, and the creditor has all of the rights of a secured creditor under Article 9

A CREDITOR IS NOT A SECURED CREDITOR UNTIL ATTACHMENT

Question 11

PERFECTION

Answer 11

Perfection deals with those steps legally required to give the secured party an interest in the collateral that is effective as against the world. In general, perfection is the process of giving public notice of the security interest to the world

Question 12

FINANCING STATEMENT

Answer 12

Document generally used to provide public notice of the security interest, and so to perfect the security interest

Question 13

TYPES OF COLLATERAL

Answer 13

1. Goods
2. Intangible or Semi-Intangible Collateral