Secured Transactions Flashcards

1
Q

How to Obtain a Security Interest

A

Debtor must sign a security agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Security Agreement

A

SA must be in writing

Signed by debtor

Identify collateral specifically

State that it is creating a security interest in favor of the secured party

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Security Interest Attachment

A

Attached when ALL 3 things occur:

  1. Secured Party (lender) gives value (makes loan)
  2. Debtor has right in collateral or power to transfer rights in collateral (must be explicit if collateral is in after-acquired goods OTHER than inventory or accounts receivable)
  3. Debtor authenticated security agreement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Perfection (definition)

A

The process of giving notice to the world that you have a security interest in the collateral (like recording for mortgages/real property).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Various ways to perfect

A
  1. File a financing statement with Sec. of State in STATE where collateral located (most common)
  2. Taking possession of property (when collateral is tangible); can take possession of goods, instruments, money, or negotiable documents.

CANNOT perfect by possession with: accounts (unless bank is secured party and account is at the bank), letters of credit, etc.

  1. Must note security interest on a certificate of title for consumer goods/equipment.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Financing Statement

A

Public document that tells the world that a security interest is created

Must have:

Debtor’s name

Secured party’s name

Basic description of collateral “can say all assets of debtor”

If security agreement and financing statement include after-acquired property, date of perfection = date financing statement filed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Priority Exceptions

A

PMSI in goods (not livestock or inventory): PMSI wins if perfected at time debtor receives collateral or within 20 days of when debtor receives collateral.

PMSI in inventory/livestock: wins if perfected when debtor has possession and gives proper notice to conflicting security holders (notice must explain PMSI in inventory, describe collateral, and be given before debtor receives possession.

Deposit accounts: secured party with control prevails.

Investment property: secured party with control over investment property has priority over secured party w/out control.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Priority Rules for Inventory

A

4 part test:

  1. PMSI perfected when debtor gets possession of inventory
  2. PM-secured party sends notice to holder of conflicting security interests
  3. Holder of conflicting interest receives notification w/in 5 years before debtors gets possession of the inventory
  4. Notification says person has or expects to get PMSI in inventory.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Priority for Equipment

A

If the collateral is equipment, PMSI prevails over conflicting security interests if PMSI perfected w/in 20 days of debtor getting possession of the property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Repossessing the Collateral

A

Upon default, secured party pay repossess collateral (but can’t breach peace, use force or threat, deceptive practices, etc.)

No judicial remedy needed, self-help; don’t have to give notice of repossession.

Can sell collateral in satisfaction of debt but must sell in commercially reasonable matter - notice to debtor, sufficient advertising, normal location/format, reasonable timeframe.

Debtor can redeem after repossession but before sale by paying off debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Goods

A

Items for personal, family, or household use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Equipment

A

Business purposes; goods bought for primary use in business

Includes gifts bought by non-profit or government agency

DEFAULT CATEGORY IF DOESN’T FIT ANYWHERE ELSE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Inventory

A

Goods held for sale or lease in ordinary course of business

Raw material and work in progress

Consumed materials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Farm Products

A

Chickens, cows, corn

2 requirements:

Must be in possession of the farmer engaged in farming operations, and

In an unmanufactured condition

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Termination Statement

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

AUTOMATIC PERMANENT PERFECTION

A

PMSI in Consumer Goods (except certificates of title or fixtures)

Assignment of an insignificant amount of debtor’s accounts

Sale of promissory notes

17
Q

AUTOMATIC TEMPORARY PERFECTION

A

Proceeds - perfected for 20 days from debtor’s receipts of the proceeds

New Value for instruments, negotiable documents, certified securities - perfected for 20 days

Delivery of instrument, negotiable document, certified security to debtor for 20 days for certain purposes

18
Q

Master Priority List

A

Secured creditor beats unsecured creditor (even if unperfected)

Two secured but unperfected creditors: winner is first to attach

Two secured creditors, only one perfected: perfected one wins

Both perfected, secured creditors: winner is first one to file OR perfect

Secured and perfected creditor wins over judicial lien; lien creditor wins over unperfected creditors

19
Q

Secured Party v. Purchaser

A

Secured party prevails unless debtor has permission to sell

If secured party unperfected at time of purchase, purchaser wins if:

  1. Buyer gives value
  2. Buyer receives delivery of item
  3. Buyer has no knowledge of security interest time of delivery

If secured party perfects PMSI within 20 days after debtor gets collateral but after debtor sells collateral, secured party wins over “gap purchaser”.

20
Q

Buyer in Ordinary Course of Business

A
  1. GF
  2. No knowledge of security interest
  3. Purchase of non-farm products
  4. Ordinary purchase from seller in goods of king
  5. Security interest created by seller
  6. Creditor not perfected by possession
21
Q
A