Secured Transactions

Question 1

How does a PMSI work?

Answer 1

A Purchase Money Security Interest in goods other than inventory or livestock prevails over other security interests if the PMSI is perfected before the debtor takes possesion of the goods or within 20 days thereafter.

Question 2

What does perfection mean?

Answer 2

Providing notice of a security interest to establish a claim superior to other parties who may wish to claim an interest in the same collateral.

Question 3

What level of specificity is required when identifying collateral in a security agreement?

Answer 3

It must be described in sufficient detail to make it possible to identify. Supergeneric descriptions like “all of my assets” won’t suffice.

Question 4

What constitutes an enforceable security interest?

Answer 4

To create an enforceable security interest, a debtor must authenticate a security agreement that describes the collateral, or the secured party must take possession or control of the collateral pursuant to a security agreement.

Question 5

When does a PMSI in inventory have priority over other security interests?

Answer 5

A PMSI in inventory has priority over all other security interests when (1) the PMSI is perfected by the time the debtor receives possession of the collateral and (2) the secured party gives notice to other creditors of its PMSI before the debtor takes possession of the collateral.