Secured Transactions Flashcards
CPA-REG Business Law
CPA - REG Business Law
When does a security interest attach; or become legally enforceable?
Secured interest must be supported by consideration given. Debtor must actually own the rights to the collateral or have possession. Secured interest much be recorded
CPA - REG Business Law
What are the characteristics of perfection of interest in a secured transaction?
Gets higher priority over others claiming rights to collateral after the perfection takes place
Attachment must take place BEFORE perfection
CPA - REG Business Law
How does perfection occur in a secured transaction?
By filing a financing statement
By possessing the collateral
CPA - REG Business Law
When does automatic perfection occur in a secured transaction?
Store sells a consumer good on credit - Store retains security interest
A bank finances the purchase of a consumer good - Bank retains security interest
CPA - REG Business Law
What are the priority rules for payment in a secured transaction?
If two parties are perfected; then the first one to file wins
If neither party is perfected; then the first one to attach wins
CPA - REG Business Law
What are the advantages of a creditor holding a lien in a secured transaction?
Creditor holds priority over claims to collateral vs. unperfected security interests
Beats perfected security interests filed after lien attachment
Exceptions: Purchase money security interest; which has a 10 day grace period to be filed
Buyers purchasing in the ordinary course of business are immune from security interests held by merchants