Secured Transactions: Security interests, attachment, perfection

Question 1

security interest definition

Answer 1

created by a written security agreement or by taking possession or control, it secures a creditors interest in the debtor’s repayment

Question 2

security agreements require

Answer 2

a granting clause, a description of the collateral, and the debtor’s signature

Question 3

Attachment is . . .

Answer 3

the process by which the security interest is created. It requires the following to occur simultaneously: (1) secured party gives value, (2) the debtor has rights in the collateral or the power of transfer, (3) the debtor has authenticated a security proper security agreement.

Question 4

PMSI

Answer 4

a purchase money security interest is a security interest in goods, where the debtor takes out credit with the direct purpose of purchasing the collateral.

Question 5

Perfection definition

Answer 5

a security interest is perfected if it has attached AND if all of the requirements for perfection have been met. These vary depending on the type of perfection (filing, possession, control)

Question 6

Perfection by filing

Answer 6

must be done in the Secretary of State’s office (or county if fixture), must include at least a generic description of the property, and must have the name of the debtor and the name of the secured party. Must also be signed.

Question 7

perfection by possession

Answer 7

applies only to goods, negotiable documents, money, and instruments. A secured party here perfects by taking possession of the collateral.

Question 8

Automatic perfection

Answer 8

If a PMSI in consumer goods, perfection is automatic as soon as the security interest attaches and remains effective permanently.