Secured Transactions Flashcards
Secured transaction law, is contained in:
Article 9 of the Uniform Commercial Code
Under Article 9, a creditor must take 2 steps to gain full protection of secured transaction law:
- **attach **a seucrity interest to the collateral
- perfect the security interest
Attachment
___ a security interests means creating a calid security interest in collateral
Attaching
Attachment
A valid securtiy agreement requires:
3 Req
- description of collateral
- the party offering the collateral must hav e rights in it
- the party gaining the security interest must give value
Attachment
There are two ways for a security interest to attach to collateral without a security agreement:
- Possession, and
- Control
Perfection
By ____ a security interest, the holder of the security interest puts the world on notice that the security interest exists.
perfecting
Perfection
Most security interests are perfected when the holder of the security interest files a:
financing statement at a central filing location in the state where the debtor is located
Once a financing statement is properly filed, the security interest is perfected and the world is considered to have notice of the security interest
Special Perfection Rules
Security interests in motor vehicles can be perfected only by:
A notation on the security interest on the vehicle’s title
Special Perfection Rules
Security interests in things attached to land (e.g., timber or fixtures) usually must be perfected with:
Filing statements that describe the land and are filed in the county where the land is located
Special Perfection Rules
Security interests in most types of collateral can be perfected by:
possession by the party holding the security interest
Special Perfection Rules
Security interests in a few types of collateral (e.g., business deposit accounts) can be perfected by:
Control
Priority
Perfected security interests have priority over:
Unperfected Security Interests
Priority
Between two perfected security interests, which one has priority?
the first to have been filed or perfected
Priority
PMSIs have priority over:
Non-PMSIs
Priority
____ have priority over creditors in bankruptcy
Perfected security interests
Priority
A ____ usually takes goods free of any security interests
buyer in the ordinary course of business
Categories of Collateral
___ are goods used or bought for personal or household purposes
Consumer Goods
Categories of Collateral
___ are goods held for sale or lease and supplies/matierals quickly used up in business
Inventory
Categories of Collateral
___ is any physical good other than consumer goods, inventory, or farm products
Equipment
Categories of Collateral
___ are a right to payment like accounts receivable
Accounts
Categories of Collateral
____ is a bank account
Deposit Accounts
A PMSI arises when:
1.the **lender loans money **to the borrower specifically for the buyer to purchase certain goods and
2. the lender retains a security interest in those goods
Generally, if a borrower defaults on a loan that is covered by a security interest, the secured party has a right to:
- sell the collateral and
- use the funds from the sale to pay itself the amount remaining on the loan
Secured parties can simply take the collateral if they can do so without:
Breaching the peace
Or they can file an action in court to force a public sale of the collateral.
Selling Collateral
___ are anything obtained on the sale of collateral
Proceeds
Selling Collateral
When collateral is disposed of, a secured party automatically obtains a security interest in ____ of the collateral
Identifiable proceeds
If an item that a secured party has an interest in is sold (assume they sell it cause they cant afford it so they also stopped making payments to secured party), then the secured party has a security interest in the proceeds from that sale (check, cash, etc). Perfection lasts for 20 days
Perfection in proceeds becomes unperfect after 20 days unless:
(A) a filed financing statement covers the original collateral;
(B) the proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed; and
(C) the proceeds are not acquired with cash proceeds;
(2) the proceeds are identifiable cash proceeds; or
(3) the security interest in the proceeds is perfected other than under subsection (c) when the security interest attaches to the proceeds or within 20 days thereafter.
