Secured Transactions - perfection of the Security Interest

Question 1

Once the security interest attaches,

Answer 1

it is enforceable.

Question 2

Perfection of the interest only…

Answer 2

…enhances the secured party’s rights to the property serving as collateral (e.g., a perfected interest will obtain priority in a bankruptcy proceeding). However, if the security interest does not attach, then it CANNOT be perfected no matter what the creditor does.

Question 3

Three different methods in which a security interest may be perfected

Answer 3

1. Filing
2. Taking possession
3. Automatic perfection.

Question 4

As to perfection of a security interest by filing…

Answer 4

The filing of a “financing statement” or the security agreement with the state is the primary method of perfection.

The filing MUST be filed by an authorized party (authorization is presumed by the debtor’s authentication of the security agreement).

Minor errors will not invalidate the financing statement unless the error makes it seriously misleading.

Question 5

The filing must contain:

Answer 5

1. The debtor’s name;
   If the debtor is a registered organization, the financing statement must provide the official registered name of the organization.
2. The secured party’s name;
3. An adequate description of the collateral;

AND

4. The filing fee.

Question 6

As to perfection by Taking Possession…

Answer 6

A secured party may perfect a security interest in negotiable documents, goods, instruments, or money by taking mere possession of such items.

Question 7

The following security interests are perfected automatically when they attach:

Answer 7

1. A purchase-money security interest in consumer goods;

AND

2. An assignment of accounts which does NOT by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor’s outstanding accounts.