Security Interests: Priorities

Question 1

Perfected Security Priority

Answer 1

Perfected security interest has priority over:
Unsecured creditors
Unperfected Security Interests
Lien Creditors
Judgement Creditors
Trustees in Bankruptcy
Perfected security interest does NOT have priority over:
Buyer in Ordinary Course of Business
- Buyer not OCB vs Perfected Secured: PS wins
- Buyer not OCB vs Secured: Buyer wins
- Buyer not OCB of consumer goods will win if:
- give value
- not know of secured party’s security interest
- buy for personal use
- buy before secured party perfects by filing
* these rules don’t apply to negotiable instruments, securities, or documents*

Question 2

Priority between Two Perfected Security Interests

Answer 2

GR: First to perfect
Except: 
1. Inventory:
- PMSI secured party perfects &
- sends written notice of perfection
2. Collateral Other than Inventory:
PMSI has priority over previously perfected non-PMSI  if PMSI perfects within 20 days of debtor taking possession of collateral. No notice required
3. Software
- same as inventory

Question 3

Perfection and the Floating Lien

Answer 3

Floating Lien:
- raw materials to sold finished goods
After-Acquired Property:
- any collateral debtor acquires in the future
Future Advances
- includes future loans