Secured Transactions Flashcards
Tangible Collateral
(1) Inventory - goods held by a business for sale/lease or raw materials
(2) Equipment - any tangible thing owned by a business not w/in other category
(3) Consumer Goods - tangible goods used or bought primarily for personal, family or household use
Intangible Collateral
(1) Account - right to receive money - collect promise to pay
(2) Deposit Account - ONLY COMMERCIAL - bank account
(3) Instrument - promise to pay in a note/CD/check - memorialized. If not memorialized, then account
(4) Chattel Paper - Represents a promise to pay and a property right (car lease, retail installment agreement)
(5) Investment Property - stocks/bonds
(6) General intangibles - IP, goodwill, right to receive an order
Attachment (rights against Debtor)
(1) Value (past or present loan, or binding promise)
(2) Debtor has rights in the collateral; and
(3) Authentication of a SA that provides adequate description of the collateral
* LAST ONE TO OCCUR = ATTACHMENT
Security Agreement
(1) Authenticated - signed or assent (oral okay if control)
(2) Description of collateral must reasonably identify (can’t be all assets) unless collateral is CG and then more specific
(3) After-acquired clause - allowed, except for in CG must be acquired w/in 10 days of secured value
(4) Proceeds - SI attaches auto to proceeds of account
Inadvertent/Undesired Attachment
(1) Lease as Disguised Sale - Lessor has no expectation of reversion value b/c lease over entire useful life or option to buy at end of lease for nominal value
(2) Consignment - non-CG of more than $1000 to a merchant for sale.
Perfection by Filing (filed in Debtor’s jurisdiction)
(1) File a FS w/ secretary of state
(2) Debtor’s Name - Individuals as listed on driver’s license; Business name as listed on public organic record; If cannot be found by name, ineffective and SI unperfect
(3) Secured Creditor’s name
(4) Description of collateral - super generic okay as long as authenticated SI covering same collateral
* *Note if debtor name changes, no effect on existing collateral but FS ineffective to perfect a SI in new collateral acquired after 4 months
Certificates of Title
For cars covered by certificate of title, perfect ONLY by applying to DMV to have lien noted on title
EXCEPTION - new or used cars/boats in dealer’s inventory
Perfection by Possession
Possession satisfies the writing requirement for attachment and the perfection step
NOTE: Possession superior to filing for instrument and chattel paper
Auto Perfection on Attachment - PMSI in CG
SI that secures repayment of the portion of loan used to purchase collateral
Perfection by Control
Exclusive for commercial deposit accounts and alternative for investment property
3 Ways for control of accounts (1) Creditor is bank where account held; (2) Control agreement or (3) creditor becomes customer at bank and adds name to account
Control of Inv. Prop - (1) Cert securities - possession; (2) Uncert securities - delivery or control agreement
Perfection as a Matter of Law in Proceeds
Auto attachment to proceeds if interest in original collateral perfected w/ 20 day grace period. Can continue if: (1) original FS describes proceeds (unlikely); (2) Identifiable Cash proceeds (3) Orginal SI perfected by filing, proceeds can be perfected by filing in same office and not acquired w/ cash proceeds (account)
Priority
(1) First to file or perfect (except control or possession)
(2) Lien creditors - if perfected before lien arises, secured creditor wins (fixtures effective against lien creditors)
(3) BIOC - perfected SI follows in hands of buyer unless sold in ordinary course of business
(4) PMSI - Equipment - perfect w/in 20 days of receiving collateral = superiopriority
PMSI in Inventory - prior to delivery, creditor must pefect PMSI and notify other creditors
Enforcement of SI
(1) Repossession - creditor can repo w/out notice and by any means as long as no breaching of the peace
(2) Redemption - debtor can redeem repossessed collateral by paying off the debt plus the creditor’s repo expenses and fees
(3) Foreclosure - must be commercially reasonable and must send notice to debtor and obligors
(4) Strict foreclosure - creditor negotiates to buy collateral from the debtor (1) proposal, (2) Notice, (3) Assent, (4) Consumer exceptions
