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Attack Cards > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

5 Inquiries for Secured Transaction Analysis

A

Remember: “SAPPD” **Come up w/ mneumonic

  • Scope?
  • Attach?
  • Perfection?
  • Priority?
  • Default?
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2
Q

Scope of Article 9 of UCC

A

Governs any transaction that creates a security interest in personal property and fixtures.

Applies only voluntary collateralizations - not statutory or mechanics liens

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3
Q

Debtor

A

entity that owes payment or performance

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4
Q

Secured party/secured creditor

A

entity that has security interest

Needs a security agreement - contract/agreement between D and secured party that creates security interest

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5
Q

Security interest

A

interest in personal property or fixtures which secures payment of performance of obligation

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6
Q

2 Types of collateral

A

Tangible:

  • consumer goods
  • equipment
  • inventory
  • farm products
  • fixtures

Intangible:

  • patents, copyrights, trademarks
  • stocks, bonds, mutual funds
  • proceeds from a sale of collateral
  • account
  • promissory note
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7
Q

Collateral - consumer goods

A

goods used for personal or familial purposes

ie. dining room set, fridge, oven, car

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8
Q

Collateral - inventory

A

goods held for sale or lease

ie. Best Buy’s stock of stereos, Nordstroms spring clothing line

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9
Q

Collateral - equipment

A

Items used in business not categorized as inventory

ie. Macy’s cash register, Barber’s barber chair, Armani’s sewing machines, Ben and Jerry’s Ice cream machine

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10
Q

Collateral - fixtures

A

items annexed to real property

ie. lighting fixtures, sprinkler system, furnace

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11
Q

Collateral - account

A

Right of payment of monetary obligation for

  • property that has been sold or is to be sold
  • services rendered
  • policy insurance issued
  • secondary obligation incurred
  • energy provided
  • debt arising out of the use a credit card, OR
  • winnings in a lottery
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12
Q

Collateral - Deposit accounts

A

A demand, time, savings, or similar account maintained with a bank.

DOES NOT include investment property

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13
Q

What does a creditor need to do to obtain a valid security interest in collateral?

A

They must ATTACH the collateral and PERFECT its interest

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14
Q

Attachment requirements

A

Remember “Attach the VCR”

  • Value must be given to debtor by creditor “ie. money”
  • Contract recording the security agreement/interest
  • Rights in the collateral. Debtor must have right to give collateral away
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15
Q

What is perfection

A

Publicity device. Puts the world on record or constructive notice that the secured party exists.

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16
Q

How to Perfect a security interest

A

Two ways

  1. Creditor files a financing statement with the Secretary of State that identifies the collateral and his security interest in it
  2. Take possession or control of the collateral that is providing the security interest
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17
Q

Financing Statement requirements

A

Must contain

  • name of debtor and secured party AND
  • describe collateral covered by financing statement
18
Q

Purchase Money Security Interests (PMSI’s)

A

Just like PMM in property
Creditor gives value (money) to debtor for the purpose of enabling debtor to acquire (purchase) rights in collateral. Creditor retains rights in collateral.

19
Q

How do PMSI’s perfect?

A

PMSI in consumer goods - automatic perfection

PMSI in non consumer goods - perfection if financing statement is filed before or within 20 days after the debtor receives delivery of collateral

20
Q

What happens to security interest when collateral is sold? (Perfection in regards to proceeds)

A

If secured party has perfected security interest in collateral, then automatically have perfected interest for 20 DAYS in proceeds Debtor received from sale of collateral

After 20 days, must take steps to perfect new interest, UNLESS:

  • identifiable cash proceeds, OR
  • original proceeds perfected under general filing rule, new proceeds may be perfected under the general rule, and proceeds are not acquired with cash proceeds
21
Q

General Rule of priority

A

First in time, first in right.

Each claimant entitled to take in FULL BEFORE a subordinate claimant entitled to take.

REMEMBER:

  • PMSI
  • BIOC
  • PAC
  • Lien
  • NOCB
  • AUPC
  • GUC
22
Q

Buyer in Ordinary Course (BIOC)

A

Takes free of a security interest created by seller.
Reqts:
-buys goods in good faith
-for value
-without knowledge that sale violates rights of another party, AND
-in ordinary course from person in business of selling such goods

23
Q

Perfected Attached Creidtor (PAC)

A

Creditor who attains perfection

24
Q

Lien Creditor (Lien or LC)

A

General creditor who gets judicial lien on collateral

25
Q

Non-Ordinary Course Buyer (NCOB)

A

Purchases collateral outside ordinary stream of commerce (ie. buying stereo from florist) - takes collateral subject to perfected security interests, but takes free from un perfected interests if no knowlege

26
Q

Attached Unperfected Creditor (AUPC)

A

Creditor who attaches but never perfects, or tries to perfect but fails

27
Q

General Unsecured Creditor (GUC)

A

lender that fails to take collateral

28
Q

What happens if debtor defaults?

A

Secured party can take possession of collateral or dispose of collateral to fulfill debt

29
Q

Self Help Repossession

A

Creditor allowed to repossess collateral w/out judicial process so long as creditor does not “breach the peace” (conduct likely to cause violence)

30
Q

What constitutes as “breach of the peace?”

A

Physical presence of Debtor plus verbal objection generally enough to constitute breach of peace

  • If collateral in D’s home, creditor may not enter w/o voluntary and contemporaneous consent
  • If collateral outside home, creditor may take if no objection by D
31
Q

Repossession by judicial action

A

Secured party can go to court to get a judicial writ, ordering sheriff to obtain possession and deliver it to the secured party

32
Q

Secured Party’s right to dispose of collateral

A

After default, secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or in any commercially reasonable manner

Debtor liable for deficiency if proceeds are not sufficient to satisfy debt owed

33
Q

Notice of disposition

A

Secured party that disposes of collateral MUST send an authenticated notification of disposition to the debtor and any secondary obligor.

-Liable for damages for failing to provide notice

34
Q

Disposition of Collateral: Foreclosure sale

A

Effect:

  • transfers all of debtor’s rights in collateral to transferee
  • discharges security interest, AND
  • discharges subordinate security interests (senior interests still attached)
35
Q

Commercially Reasonable Standard for sales of collateral

A

Commercially reasonable in manner, time, place, and other terms if made:

  • in usual manner in any recognized market
  • at current price in any market at time of sale
  • in conformity with reasonable commercial practices among dealers in similar property
36
Q

Debtor’s Right of Redemption

A

Prior to foreclosure or sale of collateral, debtor has right to to re obtain collateral. In order to redeem, debtor must:

  • tendor amount owed, AND
  • pay reasonable expenses and attorney’s fees
37
Q

Debtor’s right to damages

A

If secured party fails to comply with applicable rules concerning secured transactions, they are liable to debtor for actual damages for the amount of any loss

Irrespective of actual damages, may also recover statutory damages of $500

38
Q

Fixtures

A

Goods that have become attached to real property that an interest in them arises under real property law
-IE. built in appliances, central air, elevators, etc.)

39
Q

Perfection in fixtures

A

Fixture filing - file in office where mortgage on real estate would be filed.

Same req’ts as financing statement plus reasonable identification of real estate and name of owner

40
Q

Fixture priority

A

Security interest in fixtures BEATS real estate interest arising AFTER perfection of fixture security interest

Security interest in fixtures LOSES to real estate interest BEFORE fixture was perfected

Attack Cards (11 decks)

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