secured transactions

Question 1

consumer goods

Answer 1

goods used primarily for personal, family, household purposes

Question 2

equipment

Answer 2

goods (for business) other than consumer goods, inventory, farm products

Question 3

inventory

Answer 3

goods for sale or lease to others in the ordinary course of business, or raw materials, work in process, or materials used or consumed in business

Question 4

accessions

Answer 4

goods physically united with other goods while retaining separate identity

Question 5

farm products

Answer 5

goods used for or produced by farming operation, except uncut timber

Question 6

intangibles

Answer 6

include intellectual property, financial instruments (e.g., stocks, bonds, cash proceeds), accounts (right to payment), promissory note / chattel paper (record of monetary obligation and security interest in or lease of specific goods)

Question 7

purchase money security interest

Answer 7

interest that arises where a secured party advances money or credit to enable the debtor to purchase the collateral itself (i.e., seller finances the sale)

Question 8

valid security interest in collateral requires

Answer 8

1) attachment to collateral
2) perfection of the interest

Question 9

attachment rqeuires

Answer 9

1) security agreement
2) value
3) rights to collateral

Question 10

security agreement for attachment means

Answer 10

Debtor must authenticate security agreement granting the creditor a security interest in collateral + reasonably identify collateral

Question 11

exception for security agreement (attachment

Answer 11

creditor in possession, after acquired property (but not consumer goods unless debit acquired rights within 10 days)

Question 12

perfection

Answer 12

1. auto perfection
2. filing of notice
3. possession
4. control

Question 13

automatic perfection happens when?

Answer 13

1) PMSI for consumer goods
2) non consumer deposit accounts
3) small scale assignment of account receivable

Question 14

filing notice – financing statement should include

Answer 14

debtor’s address and correct name (as long as findable it should be ok)

Question 15

possession perfection is effective when?

Answer 15

upon and for the duration of possession

NOT applicable for intangible goods

Question 16

perfection of security interest in proceeds

Answer 16

remains automatically and temporarily perfected for 20 days from when debtor receives the proceeds

Question 17

security interest in proceeds may be effective beyond the 20 days if:

Answer 17

• cash proceeds
• financing statement in the same office
• perfected within 20 days

Question 18

when reperfection is needed

Answer 18

lapse
debtor or collateral moves out of state

Question 19

lapse

Answer 19

A perfected security interest lasts 5 years. Perfected secured party must file a continuation statement within six months before the expiration of the 5-year period. Otherwise, the perfection lapses, and the perfection procedure must be repeated

Question 20

Debtor or collateral moves out of state

Answer 20

Perfection continues in the other jurisdiction for 4 months (debtor) or 1 year (collateral), respectively. Perfection is continuous from the original perfection date if the security interest is reperfected (e.g., financing statement filed) in the new jurisdiction within the 4 months or 1 year, respectively

Question 21

BIOC takes

Answer 21

free of a security interest held by a secured creditor in the inventory (priority over the creditor)

Question 22

requirements to be a BIOC

Answer 22

• buys in good faith
• without knowledge that sale violates rights of another party
• In the ordinary course from a person int he business of selling goods of that kind

Question 23

perfected, unperfected, prior perfected, liens, unperfected vs unperfected

Answer 23

first filed perfect > next filed perfect > unperfected

prior perfected > liens

first unperfected to attach > next unperfected to attach

Question 24

exception to general priorities line up

Answer 24

1) accession vs whole: whole > accession
2) after-acquired equipment vs PMSI in same equipment: PMSI goes first
3) mortgage interest vs security interest in fixture: creditor with interest in fixture must perfect in 20 days or holder of mortgage interest will prevail

Question 25

Rights of secured party

Answer 25

can take possession of collateral

Question 26

how can secured party take collateral?

Answer 26

1) self help
2) judicial process
3) strict foreclosure (must notify)

Question 27

notification requirement for strict foreclosure if consumer good

Answer 27

debtor + any secondary obligor

Question 28

notification requirement for non consumer good

Answer 28

1) debtor
2 secondary obligor
3) other secured parties who told foreclosing creditor of their interest
4) creditor perfected 10 days before notification date

Question 29

what happens if notified party to strict foreclosure objects?

Answer 29

collateral must be disposed of by sale

Question 30

strict foreclosure – consumer goods – what happens if debtor has paid 60% of cash price of loan?

Answer 30

creditor must sell collateral

Question 31

secured party’s right to dispose of collateral

Answer 31

1) via sale in commercially reasonable manner (every aspect: time, price)
2) via deficiency judgment

Question 32

prior to sale, secured parties must send reasonable notice. what does that include?

Answer 32

time and place of public sale, or time after which a private sale will be made

Question 33

proceeds of sale goes to who in what order?

Answer 33

1) expenses of sale
2) debt
3) subordinate interests

Question 34

security interests are ____ if sale of collateral _____

Answer 34

1) discharged
2) occurs after default

Question 35

debtor’s right to redeem

Answer 35

Debtor may redeem the collateral by paying the obligated amount owed plus any interest and secured party’s reasonable expenses after default

Question 36

alienability of debtor’s rights

Answer 36

alienable, even if agreement othrwise