Secured Transactions Flashcards
What must happen for a security interest in collateral to be protected?
It must have attached and been perfected to pursue a remedy upon default.
This is a foundational principle of UCC Article 9.
To what does UCC Article 9 generally apply?
Security interests, which are consensual liens on personal property.
Who are the parties involved in a security agreement?
- Debtor
- Secured party
- Obligor
When does Article 9 not apply?
- Real property liens (e.g., mortgages)
- Statutory liens (e.g., mechanic’s lien)
- Judicial liens (e.g., judgment lien)
Define collateral in the context of secured transactions.
The personal property that is subject to the lien.
How is the classification of collateral determined?
It depends upon the principal use of the debtor.
What are the types of tangible collateral?
- Consumer goods
- Farm products
- Inventory
- Equipment
List examples of non-goods collateral.
- Account
- Negotiable instrument
- Chattel paper
- Deposit accounts
- Documents
- Investment property
- Tort claims of a business
What is attachment in secured transactions?
The creditor’s lien attaching to the collateral.
What are the required elements for attachment?
- Gives value
- Debtor has rights
- Satisfies Article 9 Statute of Frauds
What is an after-acquired property clause?
A clause creating a security interest in both current and future collateral.
What is the general purpose of perfection in secured transactions?
To provide protection to the secured party against claims by third parties.
What are the four methods for perfecting a security interest?
- Filing
- Possession
- Control
- Automatic perfection
What is required in a financing statement for perfection?
- Debtor’s name
- Secured party’s name
- Type of the collateral
True or False: A mistake in the secured party’s name affects perfection.
False.
What happens if a debtor relocates to another state?
The secured party must file in the new state within four months.
What is the effect of expiration on a filing?
A filing will expire after five years unless extended.
What collateral can be perfected by possession?
- Goods
- Negotiable documents
- Instruments
- Money
- Tangible chattel paper
What is automatic perfection?
Perfection that occurs upon attachment without additional steps.
What is the general rule for priorities in secured transactions?
“First in time, first in right.”
What is a Buyer in the Ordinary Course of Business (BOCB)?
A purchase of goods from a seller during the ordinary course of seller’s business.
What rights does a secured party have upon default?
- Take possession
- Sell, lease, or dispose of the collateral
What constitutes a breach of the peace during repossession?
If the debtor objects, consent is obtained by threat or force, or there is a trespass.
What must be included in a notice of sale or disposition?
- Description of the debtor, secured party, and collateral
- Method of disposition
- Whether public or private sale
- Statement regarding accounting
What is strict foreclosure?
Opting to keep the property in full or partial satisfaction of the debt.
What is a debtor’s right to redeem?
Right to pay the debt including expenses to regain possession of the collateral.
What happens if proceeds from a sale do not satisfy the debt for non-consumer goods?
The secured party may recover the remaining debt from the debtor.
What must the secured party do if there is a deficiency in consumer goods?
Send written notice explaining how the deficiency or surplus was calculated.
