Statutory Scheme

Question 1

PMSI

Answer 1

A PMSI arises when:
1. A seller sells goods to the debtor on credit and retains a security interest in the goods sold

2. A creditor loans funds to the debtor to enable the debtor to buy specific collateral, those funds are used by the debtor to buy that specific collateral, and the creditor takes a security interest in that specific collateral

Question 2

Leases

Answer 2

A lease is a secured transaction (not a true lease) if:
1. The lease term is equal to or greater than the remaining economic life of the goods
2. The lessee is bound to purchase the goods at the end of the lease or to renew the lease for the remaining economic life of the goods
3. At the end of the lease, the lessee has an option to purchase the goods or renew the lease for little to no consideration

Ask: is it reasonably likely that the lessor would get the goods back with meaningful economic value?

Question 3

Goods

Answer 3

Goods are tangible, moveable personal property. Classification depends on how the debtor is using the collateral.

4 types:
Consumer goods
Equipment
Farm products
Inventory

Question 4

Consumer Goods

Answer 4

Used or bought primarily for personal, family or household purposes.

Question 5

Equipment

Answer 5

Used or bought for use in a business

*Also the catchall category

Question 6

Farm Products

Answer 6

Crops, livestock, supplies, products of crops/livestock in their unmanufactured state if in possession of a debtor engaged in farming operations

Question 7

Inventory

Answer 7

Goods held for sale or lease, and materials used or consumed in a business in a short period of time

Question 8

Intangibles

Answer 8

Intangible collateral is classified based on its nature.

8 types:
Instruments
Documents
Chattel paper
Investment property
Accounts
Deposit accounts
Commercial tort claims
General intangibles

Question 9

Instruments

Answer 9

Papers representing the right to be paid money (promissory notes, checks)

Question 10

Documents

Answer 10

Papers representing the right to receive goods

Question 11

Chattel Paper

Answer 11

Record which shows both a monetary obligation and a security interest in specific goods

Question 12

Investment Property

Answer 12

Stocks, bonds, mutual funds

Question 13

Accounts

Answer 13

Right to payment for goods sold or services rendered

Question 14

Deposit Accounts

Answer 14

Bank accounts

Question 15

Commercial Tort Claims

Answer 15

A tort claim where the claimant is an organization or is an individual but the claim arose out of business and does not include personal injury damages

Question 16

General Intangibles

Answer 16

Any other personal property (typically IP)

If the principal obligation is monetary it’s a payment intangible