Secured Transactions Flashcards
What are the elements of perfection?
- Attachment
2. Act of Perfection
What are the elements of Attachment?
- Creditor gives value
- Contract–Security Agreement
- Debtor has rights in the collateral
What are acts of perfection?
1, Possession by the Creditor
- Filing of FINANCING STATEMENT
- Automatic–Temp/Permanent–attachment alone is sufficient
- Control
- Notation of the Security Interest on Certificate of Title
What are the requirements of a Financing Statement?
- Names of debtor and creditor
- Address of debtor and creditor
- Debtor’s authorization in an authenticated record. NO ORAL
- Description of the collateral
- Description of the Land if the collateral is Timber, Minerals, Fixtures, or crops
What is the time period after Debtor changes their name does perfection remain with the security interest?
4 Months unless refiled under the new name
What is the duration of a financing statement? & What is the exception?
5 Years. The exception is a recorded real property mortgage covering fixtures that continues until the mortgage is released or satisfied.
What constitutes automatic perfection?
- PMSI–> Getting a loan to buy a fridge and then using the loan money to buy the fridge. Bank has a PMSI in the fridge. ONLY FOR CONSUMER GOODS. Not fixtures or certificate of title items.
- Assignment of Insignificant Amount of Debtor’s Accounts
- Sale of Promissory Notes
What is eligible for temporary automatic perfection?
- Proceeds are automatically perfected for 20 days from the debtor’s receipt of the proceeds
- New value for instruments, negotiable documents, and certified securities are automatically perfected for a period of 20 days from attachment.
Who wins between a secured party and a Purchaser?
- Purchaser wins if:
a. Buyer gives value
b. Buyer receives delivery of the item
c. Buyer has no knowledge of the security interest at the time of delivery
What does a PMSI do against a purchaser?
Takes priority over the gap purchaser if the PMSI creditor perfects within their 20 day limit.
What is significant about a Buyer in the Ordinary Course of Business?
They can take collateral free and clear of any security interests if the following requirements are satisfied:
- Honesty in fact and observance of reasonable commercial standards
- Without notice of security interest violation
- Purchase of goods that are NOT farm goods
- It is an ordinary purchase—seller sells these items regularly
- There is a security interest created by the seller
- Creditor had not perfected by possession
What about a Nonbuyer in the ordinary course of business? Aka future advances?
Can prevail over a secured creditor for future advance amounts made after the first of these events occurs:
- Secured creditor obtains knowledge of the purchase
- 45 days have elapsed from the date of the purchase
What are the general priority rules regarding Lien creditors and secured/unsecured creditors?
- If unperfected, Lien creditor wins priority. Unless it is a PMSI who is perfected within 20 days
- If perfected, then secured creditor wins priority
When it comes to fixtures, when may a secured party win priority?
1, Fixture was perfected before the real estate interest was recorded
2. It was perfected with a fixture filing
What is the debtor’s right to redeem?
- Creditor has not yet sold or entered into a contract to sell the collateral
- Strict foreclosure has not yet occurred
- Debtor has not waived the right to redeem after default
- Debtor must tender fulfillment of all obligations secured by the collateral—not just late payments.
- AND tender all of creditor’s reasonable expenses
