Secured Transactions Flashcards
Attachment: What is attachment and how does one attach a security interest to collateral?
Attachment gives the creditor rights against the debtor in the collateral. To attach a security interest: (i) either the debtor must authenticate a security agreement granting the creditor a security interest in collateral that describes the collateral or the creditor must take possession or control of the collateral, (ii) the creditor must give value, and (iii) the debtor must have rights in the collateral.
Perfection: What is perfection and how does one obtain rights against another claimant to a debtor’s collateral?
To obtain rights against another claimant to a debtor’s collateral, a secured party must also perfect its security interest. A creditor can perfect a security interest in goods by (i) filing, in the proper public office, a financing statement that is authorized by the debtor in an authenticated record, or (ii) by taking possession.
PMSI: What is a PMSI and how is it created?
A purchase money security interest (PMSI) is a special type of security interest that gets higher than usual priority. A PMSI is created when a creditor advances credit or provides the funds needed to make a purchase possible and takes a security interest in the goods purchased.
PMSI: What is the special rule for a PMSI in consumer goods?
A PMSI in consumer goods is automatically perfected upon attachment
Collateral: What are the main categories of collateral? (ones that you’ll likely see on bar)
Consumer goods, Inventory, Equipment, Accounts, and Deposit Accounts
Collateral: What collateral is considered consumer goods?
Consumer goods: goods used or bought for personal or household purposes.
Collateral: What collateral is considered inventory?
Inventory: goods held for sale or lease and supplies/materials quickly used up in business.
Collateral: What collateral is considered equipment?
Equipment: any physical goods other than consumer goods, inventory, or farm products.
Collateral: What collateral is considered accounts?
Accounts: a right to payment (accounts receivable)
Collateral: What collateral is considered deposit accounts?
Deposit accounts: a bank account
Collateral: What is the catch-all category of collateral?
Goods that are not consumer goods, inventory, or farm products are equipment.
Priority: What is the priority rule between two perfected security interests?
Between two perfected security interests, the first secured party to file or perfect has priority.
Priority: Perfected security interest vs. unperfected security interest, who has priority?
Perfected security interests have priority over unperfected security interests.
Priority: PMSI vs. non-PMSI, who has priority?
PMSIs have priority over non-PMSIs.
Priority: Perfected security interest vs. creditors in bankruptcy, who has priority?
Perfected security interests have priority over creditors in bankruptcy.
Priority: What is the special rule for priority for a buyer in the ordinary course of business?
A buyer in the ordinary course of business usually takes goods free of any security interests (e.g. if a store gets a loan from a bank and gives the bank a security interest in the inventory of refrigerators, and then you buy a refrigerator from the store, the bank loses its security interest because you are a buyer in the ordinary course of business.)
Accessions: What are accessions?
Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost (tires on a car).
How does priority in accessions work and what is the special priority rule for accessions?
As a general rule, the rules for priority previously discussed (for example, first to file or perfect, special PMSI rules) apply to accessions. SPECIAL RULE: A security interest in an accession is subordinate to a security interest in a whole (for example, a car) which is perfected by compliance with the requirements of a certificate-of-title statute.
