Secured Transactions Flashcards
What does Article 9 of the UCC apply to?
Transactions that create a security interest in personal property or fixtures.
Define ‘Security Interest’.
A creditor’s right in a debtor’s collateral to secure repayment of a debt.
What are the attachment requirements under the VCR Rule?
Value must be given, a signed security agreement, debtor must have rights in the collateral.
What are the classifications of collateral?
- Goods: Consumer goods, equipment, inventory, farm products, fixtures.
- Intangibles: Accounts, deposit accounts, instruments, chattel paper, general intangibles.
List the methods of perfection of a security interest.
- Filing a financing statement (UCC-1).
- Possession of tangible collateral.
- Control of deposit accounts, investment property, electronic chattel paper, letter-of-credit rights.
- Automatic perfection for Purchase Money Security Interest (PMSI) in consumer goods.
- Temporary perfection for negotiable instruments or certificated securities.
What is automatic perfection?
PMSI in consumer goods is automatically perfected upon attachment.
What are the contents of a financing statement?
- Debtor’s name and address.
- Secured party’s name and address.
- Description of collateral.
- Debtor’s authorization.
What is the general priority rule in Article 9?
First to perfect or attach wins.
Who wins in a dispute between secured and unsecured creditors?
Secured creditors always win over unsecured creditors.
What is the priority of a perfected security interest over an unperfected one?
A perfected security interest wins over an unperfected security interest.
What is the super-priority for a PMSI in goods?
PMSI in goods has super-priority if perfected within 20 days of debtor receiving possession.
What must occur for a PMSI in inventory/livestock to have priority?
(1) Perfected before debtor receives inventory and (2) secured party sends notice to conflicting interests.
What does a Buyer in Ordinary Course of Business (BIOC) gain?
Takes free of a perfected security interest if they buy in good faith from a seller engaged in selling that type of goods.
What does a Buyer Not in Ordinary Course (BFP) take subject to?
Takes subject to perfected security interests but free of unperfected ones if they had no knowledge of the security interest.
Define ‘Default’ in the context of a security agreement.
Typically defined in the security agreement (failure to pay, bankruptcy, breach of agreement).
What are the two methods of repossessing collateral?
- Self-Help: Allowed if no breach of the peace.
- Judicial Process: Creditor may seek a court order for repossession.
What must the disposition of collateral be?
Must be commercially reasonable (public or private sale).
What is required before the disposition of collateral?
Secured party must send notice to debtor and other secured parties.
What is a deficiency judgment?
If the sale of collateral does not fully satisfy the debt, the creditor may sue for the remaining balance.
What is ‘Redemption’ in the context of collateral?
Debtor can redeem the collateral by paying full debt before foreclosure or sale.
