Secured Transactions Flashcards
What are consumer goods?
Goods intended to be used for personal, family, or household purposes.
What is inventory?
Goods held for sale or lease, goods to be furnished under a service contract, raw materials, and materials used or consumed by a business in a short amount of time.
What is equipment?
Equipment are goods that aren’t inventory, consumer goods, or farm products.
What are farm products?
Goods or supplies used or produced in farming operations or products of crops or livestock if in possession of a debtor engaged in farming operations.
What is attachment and how is it accomplished?
A security interest isn’t enforceable unless it has attached. Attachment requires that (i) the parties enter into a security agreement, evidenced by a record authenticated by the debtor that includes a description that reasonably identifies the collateral; (ii) the secured party has given value to the debtor; and (iii) the debtor has rights in the collateral.
How is a security interest perfected?
A PMSI in consumer goods is automatically perfected upon attachment.
Most security interests are perfected by filing a financing statement with the proper state authority.
Finally, security interests can be perfected by the secured party’s possession or control of the collateral.
Between parties who each have a perfected security interest in the same collateral, who takes priority?
The first to perfect, unless secured party has a PMSI in consumer goods or a PMSI in non-consumer goods other than inventory and livestock whose interest was perfected within 20 days after the debtor took possession of the collateral. Then, the PMSI has priority.
Between two secured parties with security interests in the same collateral, which has priority?
The first in time to either file or perfect.
Between parties with unperfected security interests in the same collateral, which has priority?
The first to attach.
How can a creditor take control of nonconsumer deposit accounts?
The bank that maintains the account automatically has control. If the secured party isn’t the bank that maintains the account, it can either put the deposit account in the secured party’s name or enter into an authenticated record with the debtor and the bank that the bank will comply with the secured party’s orders without the debtor’s consent.
How are security interests in motor vehicles perfected?
Only by notation on the certificate of title issued by the state, unless held by a dealer as inventory.
What must the financing statement include?
The debtor’s name and mailing address (either name of incorporation or name on driver’s license)
The secured party’s name and mailing address, and
A description that reasonably identifies the collateral, including supergeneric descriptions.
The filing of the financing statement must also be authorized by the debtor by authentication of a security agreement or financing statement.
What happens if the debtor relocates to a new state after perfection by filing?
The security interest will become unperfected 4 months after the debtor’s move unless the secured party files a financing statement in the new jurisdiction.
What happens if the collateral is transferred to a new owner in a different state after a financing statement is filed?
The security interest will become unperfected one year after the collateral moves unless the secured party files a financing statement in the new jurisdiction within that year.
How long does a security interest remain perfected?
A financing statement remains effective for 5 years. Within 6 months prior to expiration of the financing statement, the secured party may file a continuation statement, which is good for another 5 years.
