Secured Transactions

Question 1

What is compulsory disposition?

Answer 1

A secured party cannot retain collateral if it is consumer goods and the debtor has paid 60% or more of the obligation. In such a case, the debtor is entitled to compulsory disposition.

Question 2

What does attachment mean?

Answer 2

A term used to describe the moment when security interest is enforceable against a debtor by the secured party.

Question 3

How does a security interest attach?

Answer 3

All of these must occur:

• Secured creditor gives value
• Debtor has rights in collateral
• Security agreement exists (collateral must be in possession of secured party by debtor’s agreement OR secured party must have “control” of collateral, OR a record of security agreement must exist).

Question 4

How does a debtor get rights in collateral?

Answer 4

• Ownership interest
• Some right to possession
• Need not have title

Question 5

Who is not affected by perfection of a security interest?

Answer 5

A buyer in the ordinary course of business. The purchaser will take free of any existing security interest (perfected or unperfected) even if the buyer knows of the secured party’s security interest at the time of the sale.