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Virginia Bar > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

What is attachment

A

Attachment is how a security interest is created; creates enforcement rights.

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2
Q

What is perfection

A

Provides notice of a security interest to establish a claim superior to others

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3
Q

Enforcement

A

Repossession rights

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4
Q

Priority

A

Attachment + perfection

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5
Q

What is a security interest

A

Interest in personal property or fixture that secures payment or performance of an obligation

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6
Q

What is a security assignment?

A

Contract that creates a security interest. Secured party is a creditor that secures an interest in debtor’s

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7
Q

Who is the debtor?

A

Person that has the property interest

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8
Q

What does article 9 govern?

A

Transactions, regardless of form, that create a security interest in personal property or fixtures by contract. Security interests must be consensual. Agricultural liens and sales to certain rights to payment.

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9
Q

Who is an obligor

A

The party that must pay or perform the obligation that the collateral secures

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10
Q

What is collateral

A

Property subject to a security interest

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11
Q

What are goods

A

Anything movable when a security interest is attached

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12
Q

What are subcategories of goods

A

Consumer goods, farm products, inventory (item consumed in the operation of business), equipment

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13
Q

Rights to payment

A

Collateral that are the right to be paid money by a third party

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14
Q

What are the types of rights to payments

A

Instruments (checks, drafts, promissory notes); chattel paper (monetary obligation + lease/security interest); accounts (right to be paid for goods provided, services rendered, right to be paid under insurance); payment intangible (right to be repaid loan of money that does not fit in another category)

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15
Q

Documents

A

Documents of title that give rights to property held by bailee

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16
Q

Deposit Accounts

A

savings account, demand account, made with a bank

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17
Q

Commercial tort claims

A

claims that arose in the course of business

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18
Q

General Intangibles

A

Copyright, software, blueprints

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19
Q

Requirements for attachment

A

Value, Rights in the Collateral, Security Agreement

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20
Q

What is a requirement for the security agreement

A

Authenticated and describes collateral or unauthenticated but has possession + control

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21
Q

What is value

A

No new value must be given. Binding agreement is also value.

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22
Q

What do rights attach to

A

The attach to the extent of the debtor’s interest.

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23
Q

What is a security agreement?

A

Normally authenticated record. Record, authenticated by debtor (must show intent of debtor to be bound), must describe the collateral. Consumer goods and commercial tort claims must be described more specifically.

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24
Q

What is a lender PMSI

A

A lender loans money to a debtor to acquire goods and acquires a security interest in the goods they acquire

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25
What is the VA rule on seller PMSI
Sellers cannot acquire security interests in other types of goods
26
What is an after acquired property clause
An after acquired property clause allows a secured property to gain a security interest in property received by the debtor after the debtor authenticates the security agreement
27
What happens if a security interest is commingled
An existing security interest in collateral that subsequently becomes commingled goods is transferred to the resulting product or mass
28
When can a PMSI occur
When the collateral is goods or software
29
Perfection
Process that stakes secured party's claim to give priority
30
Methods of perfection
Filing, Possession, Control, Alternate Perfection Systems, Automatic
31
How do you file
File a financing statements where the debtor is located in a central filing office in the state. Virginia State Corporation Commission EXCEPT deposit accounts or cars
32
Where do you file when the debtor is a corporation
Location of incorporation
33
Where do you file when the collateral is oil, gas, fixtures, or timber
The place of where the land is
34
Financing statement requirements
name of the debtor, name of secure property, description of collateral, additional requirements for real property related collateral.
35
What are required but non-essential elements of financing statement
(1) Addresses for debtor and secured property and (2) indication whether debtor is an individual or org
36
What name should be used for the debtor
Whatever is on their driver's license
37
What should the description of the collateral include
Can use what is in the signing agreement. Can include a very generic statement - e.g., all assets or all personal property
38
Does incorrect indexing matter for the filing statement
No, no effect
39
Can the filing office remove a financing statement that has errors
In Virginia, yes
40
What is the duration of the financing statement
5 years, unless they are continued through a continuation statement within 6 months of the lapse
41
What name should be used for a corporation in the financing statement
The name included in the articles of incorporation
42
What can be perfected through possession
Tangible chattel, money, goods,
43
What is perfection by control
Intangible collateral by taking control. Examples: deposit accounts, electronic documents, letter of credit rights. Control is the EXCLUSIVE method of control for deposit accounts and letter of credit rights.
44
Alternative methods of perfecting - cars
Noting the lien on the certificate of title
45
Automatic perfection
PMSI in consumer goods unless a certificate of title statute governs
46
Debtor changes legal name
Would make financing statement seriously misleading, secured party has a 4 month window to amend filing statement
47
What to do if debtor moves out of state
4 month window, includes collateral obtained within that 4 month window
48
When do proceeds arise
When collateral is sold, leased, licensed, or other disposed
49
Priority rule
Secured party has priority from when they perfected in the collateral so long as they continued the perfection
50
How long is the temporary automatic perfection window
20 days
51
How can the temporary perfection window be expanded
(1) amended or initial statement; (2) cash proceeds rule: perfected in cash forever so long as the cash remains identifiable (segregated bank account); (3) remains as long as financing statement remains if (a) financing statement on file that covered the original collateral (b) proceeds are collateral in which a security interest may be perfected by filing in the office in which the financing statement has been filed (c) collateral was not turned into cash proceeds at any point
52
How can liens arise
Judicial (judgment executed) or statutory
53
Perfected interest v. Perfected interest
First in time to file or perfect
54
Perfected interest v. unperfected interest
Perfected interest > unperfected interest
55
Unperfected interest v. unperfected interest
First to attach
56
Perfected security interest v. lien
Perfected interest wins
57
Unperfected interest v. judicial lien
Lien wins UNLESS debtor has filed, but interest has not attached then the unperfected interest will take priority
58
Statutory lien v. perfected or unperfected lien
Statutory liens if (1) secures payment for services in ordinary course of business (2) possession (3) statute does not provide otherwise
59
VA Mechanics Lien
Possessory lien, but only has priority up to first $1,000
60
General rule for future advances
Typically, the first to file or perfect rule applies
61
What happens if a secured party's future advance is made within 45 days of a creditor's lien arising?
The secured party has priority over the lien creditor
62
What happens if a secured party's future advance is made after 45 days of a creditor's lien arising?
The secured party's advance is subordinate to the creditor's lien unless the advance is made without knowledge of the lien or made pursuant to a commitment entered into without knowledge of the lien
63
Buyers v. perfected security interest
Unless secured party authorizes free and clear, buyers take subject to perfected interest
64
What are exceptions to subject to interest
(1) Buyer in ordinary course of business - even if perfected and even if they are aware of the interest EXCEPT pawn brokers (2) "Garage Sale" consumer to consumer UNLESS filing statement
65
What is required for a buyer to take collateral free of an unperfected security interest where the unsecured party has not authorized the sale
The buyer must (1) give value for the collateral (2) purchase the collateral without knowledge of the existing security interest and (3) receive delivery of the chattel.
66
PMSI v. Lien Creditors
PMSIs have a 20 day grace period starting when they get possession of the collateral
67
PMSI in livestock or inventory
PMSI in livestock or inventory has priortiy over everyone else if they perfect before paper is delivered and send lender an authenticated notification
68
Two + PMSIs
First to file or perfect
69
If there are two competing PMSIs between a lender and a seller, who wins?
Seller
70
When does a security interest in fixtures have priority over an interest in the real property
When the security interest in fixtures is perfected by a fixture filing before the real property interest is recorded
71
What elements determine whether a lease is a secured transaction?
(1) the lessee is bound to renew the lease for the remaining economic life of the goods (2) lessee has the option to become the owner of the goods for no/nominal additional consideration (3) lessee is obligated to pay the full obligation under the lease regardless of early termination
72
When is a consignment subject to Art. 9
(1) consignor delivers the goods to a merchant for the merchant to sell (2) each delivery exceeds $1,000 (3) goods are not consumer goods immediately before delivery (4) merchant is not generally known by its creditors to be substantially engaged in the business of selling the goods of others
73
What is default
Default is determined by the contract
74
What are enforcement rights
Enforcement rights are cumulative
75
Repossession
(1) judicial process through replevin (2) self help repossession, vague limitation that they cannot breach the peace (brings an officer, breaks into the home, criminal act, some physical confrontations, some forms of deception/trickery)
76
Repossess big things?
Can be rendered unusable
77
What is disposition
Essentially foreclosure of the collateral, must be commercially reasonable, must send notice to a variety of parties (unless perishable, sold on a recognized market)
78
Who must be given notice
other secured parties, debtor,
79
What is the order of application of cash proceeds of a disposition
Reasonable expenses of collection and enforcement; foreclosing party's debt; subordinate interests; surplus to debtor
80
What must a defending party demonstrate to raise the defense of collateral impairment
Impairing the value of an interest in collateral includes: (i) failure to obtain or maintain perfection or recordation of the interest in collateral; (ii) release of collateral without substitution of collateral of equal value; (iii) failure to perform a duty to preserve the value of collateral owed to a debtor or surety or other person secondarily liable; or (iv) failure to comply with applicable law in disposing collateral.
81
How can a creditor obtain control of a deposit account
(1) the secured party is the bank with which the deposit account is maintained; (2) the bank, secured party, and debtor agreed in writing to follow the instructions of the secured party; or (3) the secured party becomes the bank’s customer with respect to the deposit account.

Virginia Bar (41 decks)

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