ST: Priority

Question 1

In satisfying multiple claimants - are the debts satisfied pro rata based on what debtor can pay or are they satisfied fully before moving on to the next creditor?

Answer 1

Each claimant is entitled to satisfaction in full before a subordinate claimant is entitled to take.

Question 2

What is the order of priority of the 6 types of claimants?

Answer 2

1. Buyer in the ordinary course of business,
2. Lender who has attached and perfected,
3. Lien creditor,
4. Buyer who purchased out of the ordinary course of business,
5. Lender who attached but did not perfect,
6. Non-secured lender

Question 3

How is priority determined between to creditor sin the same class?

Answer 3

By timing - first in time, first in right.

Question 4

How can a lender who has attached and perfected get the benefit of “early filing”?

Answer 4

Art. 9 allows a creditor to file early before attaching. When the creditor attaches, they will get to count the earlier filing date when deciding who came first in a battle between two creditors.

Question 5

How can a PMSI holder claim a superior interest when fighting for priority with an after-acquired collateral financier - when the collateral is equipment?

Answer 5

The PMSI must file properly within 20 days after the after-acquired collateral financier takes possession of the equipment. If the PMSI does this, he can defeat the claim of an AACF.

Question 6

How can a PMSI holder claim a superior interest when fighting for priority with an after-acquired collateral financier - when the collateral is inventory?

Answer 6

The PMSI must file properly BEFORE the debtor takes possession and must also notify the AACF before the debtor takes possession.