Secured Transactions Flashcards
Secured Transaction
Transaction that give a party a security interest.
Security Interest
Essentially like a mortgages on personal property.
Governing Law of Secured Transaction
UCC Article 9
What to look for in secured transaction questions?
- A credit transaction
AND - An agreement that creates a security interest in the debtor’s personal property to secure the debt.
Security Interest as Liens: What is a Lien?
An interest in property that secures payment of a debt or performance of an obligation.
Lien Operation: Securing Payment in Two Ways
- Additional Remedies
2. Priority
Additional Remedies Afford to Secured Interests
Lienholders generally can repossess the collateral and then sell the collateral at a foreclosure sale, all without going through the full judicial process.
Priority: Competition Between Lienholders and Unsecured Creditors
When collateral is sold at a foreclosure sale, the proceeds of the sale are used to pay creditors with liens before those without liens.
Priority: Competition Between Lienholders
If there is more than one lien no a piece of property, the general rule is that the first lienholder to provide public notice of its lien gets paid first.
Liens Compared to Other Property Interests
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Types of Liens
- Consensual Liens
- Judicial Liens
- Liens Obtained by Operation of Law
Consensual Liens
Liens created by contract
**Security Interest and Real Estate Mortgages
Judicial Liens
Liens obtained by some judicial process.
**Execution lien
Liens Obtained by Operation of Law
Liens obtained by statute or common law.
**People who do work on you land or house receive a mechanics lien.
Collateral
The property subject to a security interest.
Debtor
Person who owes money to someone.
Any person with an interest in the collateral, other than a security interest.
Secured Party/Secured Creditor
A lender, seller, or other creditor who has a security interest.
Secured Agreement
An agreement between the secured party and the debtor that creates a security interest in personal property.
Purchase Money Security Interest
Created where the money loaned as party of a secured transaction is used to buy the collateral
Types of PMSI
- Seller
2. Lender
Seller PMSI
A security interest taken by the seller of collateral to secure all or party of the purchase price of the collateral
**The seller and lender must be the same person
Elements of a Seller PMSI
Creditor sells goods to debtor on credit and retains security interest
or
Creditor advances debtor funds used to buy and takes security interest in goods
Lender PMSI
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Scope of Article 9
Contractual Security Interest
Sales of Accounts, Chattel Paper, Payment Intangibles, and Promissory Notes
Commercial Consignments
Agricultural Liens
Leases intended to serve as security arrangements
Seller’s retention of title to delivered goods
Article 9 Exception
Does not Apply to Land Interests
Dual Status Rule: PMSI
Security Interest in Nonconsumer goods does not lose its status as PMSI if:
security interest also secured by property not purchased on credit; collateral also secures advances not made for purchase; or PMSI has been refinanced
Types of Collateral
Tangible Collateral;
Intangible Collateral; and
Proceeds
Tangible Collateral
Consumer Goods
Inventory
Farm Products
Equipment
Intangible/Semi-Tangible Collateral
Instruments Documents Chattel Paper Accounts Deposit Accounts--bank accounts Investment Property Commercial Tort Claims General Intangibles
Proceeds
What is received from sale, exchange, collection, or other disposition of collateral or proceeds
Attachment
Secures rights against debtor
Rights against third party require perfection
Requisites for Attachment
Need all three:
- Parties agree to create security interest in which (i) creditor takes possession of collateral, (ii) debtor’s authenticates security agreement describing collateral, or (iii) creditor takes control of certain types of collateral; and
- Value give by secured party; and
- Debtor has rights in collateral
Description of Collateral
Cannot say “all of the debtor’s assets”
Consumer goods, consumer securities accounts and commercial tort claims need specific descriptions
Methods of Obtaining Control
Nonconsumer Deposit Accounts
Electronic Chattel Paper; and
Investment Property