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MEE GMW > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

What is a secured transaction?

A

A transaction intended to create a security interest in personal property or fixtures

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2
Q

Debtor

A

Person who owes payment or performance of the obligation secured

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3
Q

Secured Party

A

Aka creditor – lender, seller, other person in whose favor there is a security interest

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4
Q

Security Agreement

A

Agreement between the debtor and secured party that creates the security interest

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5
Q

Security Interest

A

Interest in personal property or fixtures that secures payment or performance of an obligation

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6
Q

Collateral

A

Property subject to a security interest

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7
Q

Purchase Money Security Interest (PMSI)

A

Security interest in goods

Can be seller-financed (secured party sells** goods to debtor on credit and retains security interest in goods) or financer-financed (creditor **loans funds to debtor to enable debtor to buy specific collateral and creditor takes security interest in collateral)

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8
Q

After-acquired Property Clause

A

Grants security interest in property obtained in the future

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9
Q

Future Advance Clause

A

Grant of security agreement securing new, future loans with same collateral

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10
Q

Attachment

A

Steps legally required to give secured party a security interest in the collateral against the debtor

Creditor is not secured until attachment

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11
Q

Perfection

A

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

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12
Q

Financing Statement

A

Document generally used to provide public notice of security interest

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13
Q

What are the two types of collateral?

A
  • Goods (tangible, movable, personal property)
  • Intangibles/semi-intangibles
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14
Q

What are the types of goods?

A
  • Consumer goods (family/household use)
  • Equipment (business) **DEFAULT
  • Farm products (crops or livestock)
  • Inventory (held for sale or lease)
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15
Q

What are the types of intangibles?

A
  1. Instruments (checks)
  2. Documents (represents right to receive goods)
  3. Chattel paper (evidences monetary obligation and a security interest in or a lease of specific goods)
  4. Investment property (stocks, bonds)
  5. Accounts (right to payment for property sold/services rendered)
  6. Deposit account (non-consumer account maintained with a bank)
  7. Commercial tort claim
  8. General intangible (any other property) **DEFAULT
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16
Q

If the debtor changes the use of collateral, does the financing statement remain effective?

A

Yes.

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17
Q

Requirements for attachment

A
  1. Parties must enter into a security agreement.
    1. Three requirements
  2. Value must be given by secured party.
    1. Any consideration sufficient to support a simple contract
  3. Debtor must have rights in the collateral.
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18
Q

Requirements of a security agreement

A
  • Must show an intent to create a security interest
  • Must be authenticated (signed) by the debtor
  • Agreement must contain a description of the collateral that reasonably identifies the collateral
19
Q

What does a security interest in after-acquired property reach?

A

Without an explicit clause, only the collateral the debtor had rights in at the time of signing a security agreement.

Except if the collateral is a type rapidly depleted and replenished - then automatic attachment.

20
Q

Security interest in collateral _____________ attaches to identifiable proceeds of collateral.

A

Automatically

Identifiable = proceeds can be traced back to original collateral

21
Q

Lowest intermediate balance rule

A

For commingled cash proceeds, look at the balance at the time the proceeds are deposited and ending at the time you apply the rule. The lowest balance during the time period is the secured party’s identifiable proceeds NOT exceeding the value of the proceeds.

22
Q

What are the methods of perfecting a security interest?

A
  • Automatic perfection
  • Taking possession
  • Control
  • Filing
  • Temporary perfection
23
Q

A PMSI in consumer goods is perfected

A

as soon as it attaches.

Except motor vehicles

24
Q

Perfection by taking possession does not apply to

A

general intangibles, deposit accounts, nonnegotiable documents, electronic chattel paper, certificate of title goods, accounts

25
Q

Perfection by taking control is the only way to perfect ______________.

A

Nonconsumer deposit accounts

26
Q

How do you perfect an interest in a motor vehicle?

A

Notation of the lien on the certificate of title by the state.

Except if the debtor is holding the vehicle as inventory (ie. dealer).

27
Q

What must a financing statement contain?

A
  • Debtor’s name and mailing address
    • Match driver’s license, error cannot be seriously misleading
  • Secured party’s name and mailing address
  • Description of the collateral
    • Reasonably identify

And the debtor must authorize the statement

28
Q

Which state’s law governs the perfection of a security interest?

A

The law of the state where the debtor is located

  • Individual = principal residence
  • Registered organization = where organized
  • Unregistered organization = place of business
  • If the debtor moves = unperfected 4 months after the move
  • If the collateral moves = unperfected 1 year after the move
29
Q

A secured party _______________ has a perfected security interest in any proceeds of collateral for ______ days after the receipt of the proceeds.

A

Automatically; 20

30
Q

How long is a financing statement good for?

A

5 years; may be continued for 5 more years

31
Q

Who has priority between two secured creditors?

A

The first to file or perfect, whichever is earlier.

32
Q

A PMSI in equipment has priority in a conflicting security interest in the same goods if

A

the interest is perfected before or within 20 days after the debtor gets possession of the collateral.

33
Q

A security party prevails over a buyer unless

A
  • authorized sale by the secured party
  • a buyer in the ordinary course of business takes free of the security interest in goods created by the buyer’s seller
  • a buyer not in the ordinary course takes free of an unperfected security interest
  • in a consumer to consumer sale, the buyer takes free of the security interest if no knowledge, for value, personal use, and no financing statement filed
34
Q

What is a buyer in the ordinary course?

A

(1) in good faith, (2) without knowledge that the sale violates the rights of another person in the goods, and (3) in the ordinary course of business from a seller in the business of selling goods of the kind purchased

35
Q

A judgment lien creditor will prevails over a secured creditor if

A

the judgment lien creditor became such before the security interest was perfected

36
Q

A statutory lienholder has priority over a secured creditor if

A

the statutory lien holder maintains possession

37
Q

When is self-help repossession permitted?

A

if it can be done without breach of the peace (potential to lead to violence)

38
Q

Methods of repossession

A
  • self-help
  • judicial process
  • rendering equipment unusable
  • strict foreclosure (creditor keeps collateral)
  • Resale (must be commercially reasonable)
39
Q

When may the debtor redeem the collateral?

A

Any time before resale by tendering fulfillment of all obligations secured by the collateral, plus any additional expenses

40
Q

What is a fixture?

A

goods permanently attached to real property.

41
Q

How do you perfect an interest in a fixture?

A

A fixture filing in the office where the mortgage on the real estate would be filed.

A security interest in the fixture has priority over all interests in the real property. The holder can remove the fixture.

42
Q

Fixture Priority

A

Construction mortgage → PMSI filed w/in 20 days → prior real estate interest

43
Q

What is an accession?

A

Goods that are physically united with other goods in a manner that the identity of the original goods is not lost (ie. tires on a car)

44
Q

When can an accession be removed?

A

If the interest has priority over the claims of every creditor in the whole

MEE GMW (8 decks)

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