Secured_Transactions Flashcards
When does a security interest attach?
PIG
When 3 conditions occures PIG - enforce against Debtor
- Debtor must actually own the rights to the collateral or have Possession
-
Secured Interest much be created:
- signed security agreement or
- take possession
- Secured party** Gives** value
What are the characteristics of perfection of interest in a secured transaction?
- Gets higher priority over others claiming rights to collateral after the perfection takes place
- Attachment must take place BEFORE perfection
How does perfection occur in a secured transaction?
FAT
Perfection occurs when the secured interest has **attached AND 1 of the following FAT **
- By filing a Financing statement - renew every 5 years- description of property - name creditor and debtor - signature of debtor
- Automatic perfection - PMSI in consumer goods - except debtor sell the consumer good to another consumer - need to file in 20 days of attachment / 4 months
- By Taking possession the collateral - pawnbroker (best way to perfect)
Purchase Money Security Interest - PMSI-
- A PMSI is a security interest that can have super priority. It arises when
- Store sells a consumer good on credit - Store retains security interest
- A bank finances the purchase of a consumer good - Bank retains security interest
- PMSI in noninventory good - MUST perfect within 20 days of debtor possession of collateral
- PMSI in inventory good - MUST perfect and give notice to other perfected interest **prior to debtor receiving inventory **
What are the priority rules for payment in a secured transaction?
- Buyer in the ordinary course of business - inventory rule
- Holder of the statutory lien (mechanic lien) depending on state statute
- PMSI when attached and perfected simultaneously
- Perfected secured creditor - by filling
- Other perfected interests or judicial liens (court order/garnish wages)
- Unperfected secured creditor
- Debtor
What are the advantages of a creditor holding a lien in a secured transaction?
- Creditor holds priority over claims to collateral vs. unperfected security interests
- Beats perfected security interests filed after lien attachment Exceptions: Purchase money security interest; which has a 10 day grace period to be filed
- Buyers purchasing in the ordinary course of business are immune from security interests held by merchants
Secured Transactions
**An agreement where a creditor receives additional assurance of payment by debtor who provide collateral in which the creditor obtains interest **
NO real property
Types of collateral
- Goods - consumer goods, equipment, inventory
- Indipensible paper
- intangibles
Security Agreement
- Agreemtn between the debtor and creditor that gives the creditor a security interest in the debtor’s collateral
-
Requirements:
- in writting except when creditor has physical possession of collateral
- signed by the creditor
- **a description of the collateral **
Right of parties upon default
- Debtor can excercise right of redemption by paying off loan
- **Secure party must sell the collateral if debtor paid > 60% of the debt **
- Secure party may obtain a deficiency judgement for the amount still owed after proceed of sale paid the expense of repossesion sale and part of debt owed
- A good faith purcharser for value at privte sale will take the property free from any security interest or subordinate liens in a property, BUT remains subject to security interest which are senior to that being discharged at the sale