Secured Transactions

Question 1

Article 9 applies to:

Answer 1

consensual security interest in personalty or fixtures

Question 2

Determining the tangible collateral depends on?

Answer 2

primary use of collateral in hands of debtors

Question 3

Attachment means that the security interest is _____.

Answer 3

enforceable

Question 4

Requirements for attachment.

Answer 4

1) Value must be given by creditor
2) contract - security agreement
3) rights

Question 5

Is a contract required for a security transaction when the secured party is in possession of collateral?

Answer 5

No - only when debtor retains possession of collateral

Question 6

What is required for the security agreement?

Answer 6

1) authenticated by debtor (signed/electrically marked); and

2) reasonable identified collateral

Question 7

After acquired collateral clauses are _____.

Answer 7

enforceable.

allows lender’s lien to float

Question 8

Proper perfection helps the secured party be protected from?

Answer 8

competing creditors

Question 9

How to attain perfection?

Answer 9

1) secured party’s taking possession of the collateral
2) PMSI automatic for consumer goods
3) secured party files notice (record or constructive notice) - by filing the security agreement or a financing statement

Question 10

What is a purchase money security interest?

Answer 10

automatically attaches to consumer goods upon attachment.

Question 11

What must be included with financing statement?

Answer 11

1) debtor’s name and address
2) creditor’s name and address; and
3) description of collateral

Question 12

Where is the financing statement filed in VA?

Answer 12

State corporation commission - filing done centrally
individual (principal residence)
corporation (where it is organized)

Question 13

Attached unperfected creditor is?

Answer 13

creditor who creates an enforceable security interest, it attached but not perfected due to an error

Question 14

Order of priority for security agreement?

Answer 14

1) buyer in ordinary course
2) perfected attached creditor
3) lien creditor - judicial lien
4) non-ordinary course buyer
5) attached unperfected creditor
6) general unsecured creditor

Question 15

1) buyer in ordinary course
2) perfected attached creditor
3) ________
4) non-ordinary course buyer
5) ________
6) general unsecured creditor

Answer 15

3) lien creditor - judicial lien

5) attached unperfected creditor

Question 16

Attached unperfected creditor’s interest is enforced against ____.

Answer 16

1) debtor; and

2) any subsequent attached unperfected creditor or general unsecured creditor

Question 17

To determine priority between perfected attached creditors?

Answer 17

Priority to first to file; can file at onset of loan negotiations and priority will related back to early filing if secured agreement is attached.

Question 18

Determining priority between after-acquired collateral financier and subsequent holder of a purchase money security interest (PMSI) requires?

Answer 18

a) consumer goods - PMSI
b) equipment - PMSI, if filed properly within 20 days of debtor taking possession
c) inventory - PMSI if filed properly when debtor takes possession and PMSI notifies earlier after-acquired collateral financier

Question 19

Determining priority between perfected attached creditor and buyer in ordinary course?

Answer 19

Buyer in ordinary course

Question 20

If a debtor is default under the security agreement, what can the creditor do?

Answer 20

1) self-help repossession (not made over any protest of debtor)
2) repossession by judicial writ of attachment (Sheriff)

Question 21

Once the creditor repossesses the collateral, what can creditor do?

Answer 21

1) strict foreclosure - retain collateral in full satisfaction of debt
2) sale of the collateral (public or private)
3) action for a deficiency judgment

Question 22

Once a creditor repossess and strictly forecloses the collateral, what must the creditor do to give notice?

Answer 22

• consumer goods - written notice to debtor and secondary obligators (surety)
• property other than consumer goods - written notice to debtor and other creditors who have told foreclosing creditor of their security interest including perfected attached creditors

Question 23

Is foreclosure available to a creditor when the collateral is consumer goods and debtor has paid at least 60% of loan?

Answer 23

strict foreclosure is not allowed

must sell collateral within 90 days or be liable in conversion

Question 24

Is foreclosure available to a creditor when the collateral is consumer goods and debtor has paid at least 60% of purchase price for a PMSI?

Answer 24

strict foreclosure is not allowed

- secured party must sale collateral within 90 days or be liable in conversion

Question 25

A secured party who repossess in event of default may sale the collateral by?

Answer 25

sale must be commercially reasonable

• public (auction) - time and place of sale
• private - time after which sale will be made

Question 26

At a sale of collateral from a debtor in default, may a secured party purchase collateral?

Answer 26

At public sale - yes

At private sale - no, need to avoid self dealing