Secured Transactions

Question 1

Secured transaction law, is contained in:

Answer 1

Article 9 of the Uniform Commercial Code

Question 2

Under Article 9, a creditor must take 2 steps to gain full protection of secured transaction law:

Answer 2

1. **attach **a seucrity interest to the collateral
2. perfect the security interest

Question 3

Attachment

___ a security interests means creating a calid security interest in collateral

Answer 3

Attaching

Question 4

Attachment

A valid securtiy agreement requires:

3 Req

Answer 4

1. description of collateral
2. the party offering the collateral must hav e rights in it
3. the party gaining the security interest must give value

Question 5

Attachment

There are two ways for a security interest to attach to collateral without a security agreement:

Answer 5

1. Possession, and
2. Control

Question 6

Perfection

By ____ a security interest, the holder of the security interest puts the world on notice that the security interest exists.

Answer 6

perfecting

Question 7

Perfection

Most security interests are perfected when the holder of the security interest files a:

Answer 7

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

Question 8

Special Perfection Rules

Security interests in motor vehicles can be perfected only by:

Answer 8

A notation on the security interest on the vehicle’s title

Question 9

Special Perfection Rules

Security interests in things attached to land (e.g., timber or fixtures) usually must be perfected with:

Answer 9

Filing statements that describe the land and are filed in the county where the land is located

Question 10

Special Perfection Rules

Security interests in most types of collateral can be perfected by:

Answer 10

possession by the party holding the security interest

Question 11

Special Perfection Rules

Security interests in a few types of collateral (e.g., business deposit accounts) can be perfected by:

Answer 11

Control

Question 12

Priority

Perfected security interests have priority over:

Answer 12

Unperfected Security Interests

Question 13

Priority

Between two perfected security interests, which one has priority?

Answer 13

the first to have been filed or perfected

Question 14

Priority

PMSIs have priority over:

Answer 14

Non-PMSIs

Question 15

Priority

____ have priority over creditors in bankruptcy

Answer 15

Perfected security interests

Question 16

Priority

A ____ usually takes goods free of any security interests

Answer 16

buyer in the ordinary course of business

Question 17

Categories of Collateral

___ are goods used or bought for personal or household purposes

Answer 17

Consumer Goods

Question 18

Categories of Collateral

___ are goods held for sale or lease and supplies/matierals quickly used up in business

Answer 18

Inventory

Question 19

Categories of Collateral

___ is any physical good other than consumer goods, inventory, or farm products

Answer 19

Equipment

Question 20

Categories of Collateral

___ are a right to payment like accounts receivable

Answer 20

Accounts

Question 21

Categories of Collateral

____ is a bank account

Answer 21

Deposit Accounts

Question 22

A PMSI arises when:

Answer 22

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

Question 23

Generally, if a borrower defaults on a loan that is covered by a security interest, the secured party has a right to:

Answer 23

1. sell the collateral and
2. use the funds from the sale to pay itself the amount remaining on the loan

Question 24

Secured parties can simply take the collateral if they can do so without:

Answer 24

Breaching the peace

Or they can file an action in court to force a public sale of the collateral.

Question 25

Selling Collateral

___ are anything obtained on the sale of collateral

Answer 25

Proceeds

Question 26

Selling Collateral

When collateral is disposed of, a secured party automatically obtains a security interest in ____ of the collateral

Answer 26

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

Question 27

Perfection in proceeds becomes unperfect after 20 days unless:

Answer 27

(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.