Secured Transactions Flashcards
This is a word for personal property/possessions other than real estate
Chattels
Secured transactions are when debt is secured by ____
Chattels
This is a creditor who advances money or credit to enable a debtor to obtain collateral and then the creditor takes a security interest in that collateral
a Purchase Money Security Interest (PMSI) Creditor
a Non PMSI creditor gives you a loan and takes a security interest in what?
EXISTING collateral, not the item purchased with the loan
This is when a creditor takes as collateral property to be acquired by the debtor at later date
After Acquired Property Clause
an After Acquired Property Clause is used most often with ______ & ________
Inventory
Equipment
_________ creates a secured transaction
Attachment
What are the 3 elements of attachment? (DR AV)
D - Debtor must have Rights in the collateral
A - Agreement between creditor & debtor (written/oral)
V - Value must be given by the creditor to the debtor
When can an agreement be oral?
Only if the creditor takes possession with the debtor’s agreement (pledge)
T/F
When the agreement is written it must be signed by both the debtor and the creditor
FALSE
It need only be signed by the debtor
T/F
Attachment can occur if at least 2 of the 3 elements have been met
FALSE
All three elements must be met
________ is the creditor’s rights vs. subsequent 3rd parties. It means that the 1st creditor gives notice to all other creditors that he has 1st rights to the collateral.
Perfection
If a creditor is unperfected, then the creditor is _____
Unprotected
What are the three ways for a creditor to be perfected?
1) Perfection by creditor taking possession of collateral
2) Perfection by filing a financing statement
3) Perfection by attachment
What is the only way to perfect with negotiable instruments, stocks, or bonds?
Perfection by creditor taking possession of collateral
What is the only way to perfect with accounts receivable? Why?
Filing a financing statement
Because A/R is intangible so the creditor cannot take possession of the collateral
What must be included in a financing statement?
1) Names and addresses of parties
2) General description of collateral
3) Signature of debtor
What perfection method can only occur with PMSI Creditors in consumer goods?
perfection by attachment
One who perfects by attachment beats ______
All other creditors
One who perfects by attachment loses ______
collateral to any consumer purchaser (innocent purchaser who has no idea of an attachment) who purchases the collateral from the debtor
How can a creditor protect against losing collateral to an innocent purchaser when they are perfected by attachment?
They can protect against the loss by filing a financing statement
Usually a perfected creditor beats a purchaser from debtor. What are the 2 exceptions?
1) One who perfects by attachment loses to purchaser without notice (filing a financing statement)
2) One who buys from a merchant in ordinary course of business takes free of all security interests
T/F
When one buys from a merchant in ordinary course of business, they take free of all security interests unless they had notice of the security interest
FALSE
When one buys from a merchant in ordinary course of business, they take free of all security interests EVEN IF they had notice of the security interest
Example: When I buy from Macy’s, Macy’s creditors can’t pursue me if Macy’s defaults, no matter what.
Usually the first creditor to file or perfect wins (1st in time, 1st in line). What are the 2 exceptions?
1) PMSI creditor in non-inventory collateral has priority if they file within 20 days of the debtor getting possession, even if a Non-PMSI files a financing statement first
2) PMSI creditor in inventory collateral has priority if before the debtor gets possession they file and give written notice to creditors ahead of him
When a PMSI creditor in non-inventory collateral is trying to gain priority in perfecting, the must file within ______ of the debtor getting possession
20 days
T/F
A PMSI creditor in non-inventory collateral cannot gain priority in perfecting if a non-PMSI files a financing statement first
FALSE
PMSI creditor in non-inventory collateral has priority if they file within 20 days of the debtor getting possession, even if a Non-PMSI files a financing statement first
T/F
A PMSI creditor in inventory collateral can get priority in perfecting as long as they give notice to the other creditors
FALSE
PMSI creditor in inventory collateral has priority if BEFORE the debtor gets possession they file AND give written notice to creditors ahead of him
What are the 3 remedies of a creditor after the debtor defaults?
1) Repossess the collateral
2) Strict Foreclosure
3) Sue the debtor
When a creditor peacefully repossess the collateral and puts it up for sale at a public sale, the creditor (can/cannot) ______ bid on the collateral to get it back
CAN
When a creditor peacefully repossess the collateral and puts it up for sale at a private sale, the creditor (can/cannot) ______ bid on the collateral to get it back
CANNOT
T/F
After a creditor peacefully repossess the collateral and sells it, the debtor is liable for any deficiency but isn’t entitled to any surplus
FALSE
They are liable for any deficiency but also are entitled to any surplus
This is the remedy of a creditor after the debtor defaults where the creditor keeps the collateral but cancels the debt
Strict Foreclosure
T/F
In a strict foreclosure, the creditor must get an appraisal on the collateral and then considers that amount against the debt - the debtor is liable for any deficiency and is entitled to any surplus
FALSE
In a strict foreclosure the creditor keeps the collateral and must cancel the ENTIRE debt
If the debtor or other creditors with to object to a strict foreclosure, how much time do they have to make their objections known?
21 days
T/F
The debtor or other creditors can force a creditor to sell the collateral instead of choosing the strict foreclosure remedy
TRUE
Note that the debtor and other creditors must voice this within 21 days
If the debtor has paid __% or more of the price of consumer goods, the creditor must sell unless the debtor specifically waives this right
60%
This remedy is often used if collateral is insufficient to pay the debt owed
Suing the debtor. This is called a deficiency judgment
A trustee may set aside transfers made within ___ prior to the filing of the bankruptcy petition if these transfers were made with intent to _____ any creditor.
One year
Hinder, delay, or defraud any creditor
T/F
When a trustee sets aside transfers made within one year prior to the filing of the bankruptcy petition, the trustee must first consider the solvency of the debtor at that time
FALSE
The debtor need not be insolvent at the time of transfer
A trustee may also set aside transfers made within one year prior to the filing of the bankruptcy petition if the debtor received ________ value in exchange for such transfer or obligation and the debtor was ______ at the time or ______ as a result
Less than a reasonably equivalent value
Insolvent at the time or became insolvent as a result
A trustee may set aside preferential transfers of nonexempt property to a creditor made within ____ prior to the filing of the petition. What is the exception?
90 days
Up to 1 year for preferential transfers made to insiders
This action is made for preexisting debts that enable the creditor to receive more than s/he would have otherwise under a Chapter 7 liquidation proceeding
Preferential Transfers
What is a contemporaneous exchange?
An exchange between a creditor and debtor whereby the debtor receives new, present (i.e. contemporaneous) value.
