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Virginia Bar > Secured Transactions > Flashcards

Secured Transactions Flashcards

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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
Q

What is the VA rule on seller PMSI

A

Sellers cannot acquire security interests in other types of goods

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26
Q

What is an after acquired property clause

A

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

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27
Q

What happens if a security interest is commingled

A

An existing security interest in collateral that subsequently becomes commingled goods is transferred to the resulting product or mass

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28
Q

When can a PMSI occur

A

When the collateral is goods or software

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29
Q

Perfection

A

Process that stakes secured party’s claim to give priority

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30
Q

Methods of perfection

A

Filing, Possession, Control, Alternate Perfection Systems, Automatic

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31
Q

How do you file

A

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

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32
Q

Where do you file when the debtor is a corporation

A

Location of incorporation

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33
Q

Where do you file when the collateral is oil, gas, fixtures, or timber

A

The place of where the land is

34
Q

Financing statement requirements

A

name of the debtor, name of secure property, description of collateral, additional requirements for real property related collateral.

35
Q

What are required but non-essential elements of financing statement

A

(1) Addresses for debtor and secured property and (2) indication whether debtor is an individual or org

36
Q

What name should be used for the debtor

A

Whatever is on their driver’s license

37
Q

What should the description of the collateral include

A

Can use what is in the signing agreement. Can include a very generic statement - e.g., all assets or all personal property

38
Q

Does incorrect indexing matter for the filing statement

A

No, no effect

39
Q

Can the filing office remove a financing statement that has errors

A

In Virginia, yes

40
Q

What is the duration of the financing statement

A

5 years, unless they are continued through a continuation statement within 6 months of the lapse

41
Q

What name should be used for a corporation in the financing statement

A

The name included in the articles of incorporation

42
Q

What can be perfected through possession

A

Tangible chattel, money, goods,

43
Q

What is perfection by control

A

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
Q

Alternative methods of perfecting - cars

A

Noting the lien on the certificate of title

45
Q

Automatic perfection

A

PMSI in consumer goods unless a certificate of title statute governs

46
Q

Debtor changes legal name

A

Would make financing statement seriously misleading, secured party has a 4 month window to amend filing statement

47
Q

What to do if debtor moves out of state

A

4 month window, includes collateral obtained within that 4 month window

48
Q

When do proceeds arise

A

When collateral is sold, leased, licensed, or other disposed

49
Q

Priority rule

A

Secured party has priority from when they perfected in the collateral so long as they continued the perfection

50
Q

How long is the temporary automatic perfection window

A

20 days

51
Q

How can the temporary perfection window be expanded

A

(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
Q

How can liens arise

A

Judicial (judgment executed) or statutory

53
Q

Perfected interest v. Perfected interest

A

First in time to file or perfect

54
Q

Perfected interest v. unperfected interest

A

Perfected interest > unperfected interest

55
Q

Unperfected interest v. unperfected interest

A

First to attach

56
Q

Perfected security interest v. lien

A

Perfected interest wins

57
Q

Unperfected interest v. judicial lien

A

Lien wins UNLESS debtor has filed, but interest has not attached then the unperfected interest will take priority

58
Q

Statutory lien v. perfected or unperfected lien

A

Statutory liens if (1) secures payment for services in ordinary course of business (2) possession (3) statute does not provide otherwise

59
Q

VA Mechanics Lien

A

Possessory lien, but only has priority up to first $1,000

60
Q

General rule for future advances

A

Typically, the first to file or perfect rule applies

61
Q

What happens if a secured party’s future advance is made within 45 days of a creditor’s lien arising?

A

The secured party has priority over the lien creditor

62
Q

What happens if a secured party’s future advance is made after 45 days of a creditor’s lien arising?

A

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
Q

Buyers v. perfected security interest

A

Unless secured party authorizes free and clear, buyers take subject to perfected interest

64
Q

What are exceptions to subject to interest

A

(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
Q

What is required for a buyer to take collateral free of an unperfected security interest where the unsecured party has not authorized the sale

A

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
Q

PMSI v. Lien Creditors

A

PMSIs have a 20 day grace period starting when they get possession of the collateral

67
Q

PMSI in livestock or inventory

A

PMSI in livestock or inventory has priortiy over everyone else if they perfect before paper is delivered and send lender an authenticated notification

68
Q

Two + PMSIs

A

First to file or perfect

69
Q

If there are two competing PMSIs between a lender and a seller, who wins?

A

Seller

70
Q

When does a security interest in fixtures have priority over an interest in the real property

A

When the security interest in fixtures is perfected by a fixture filing before the real property interest is recorded

71
Q

What elements determine whether a lease is a secured transaction?

A

(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
Q

When is a consignment subject to Art. 9

A

(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
Q

What is default

A

Default is determined by the contract

74
Q

What are enforcement rights

A

Enforcement rights are cumulative

75
Q

Repossession

A

(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
Q

Repossess big things?

A

Can be rendered unusable

77
Q

What is disposition

A

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
Q

Who must be given notice

A

other secured parties, debtor,

79
Q

What is the order of application of cash proceeds of a disposition

A

Reasonable expenses of collection and enforcement; foreclosing party’s debt; subordinate interests; surplus to debtor

80
Q

What must a defending party demonstrate to raise the defense of collateral impairment

A

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
Q

How can a creditor obtain control of a deposit account

A

(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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