Terminology

Question 1

What is a secured transaction?

Answer 1

A transaction intended to create a security interest in personal property or fixtures.

Generally involves a sale on credit or a loan in which the seller or the lender obtains a lien on some or all of the debtor’s property as security for payment.

Question 2

What am I looking for?

Answer 2

(1) A credit transaction (sale on credit or a loan and (2) an agreement that creates a lien in favor of the creditor in the debtor’s personal property to secure the debt.

Looks like? A sale where the buyer does not pay full purchase price @ time of sale.

Nothing to do w/ credit cards.

Question 3

Debtor

Answer 3

The person who owes payment or performance of the obligation secured.

Question 4

Secured party

Answer 4

A lender, seller, or other person in whose favor there is a security interest.

aka secured creditor

Question 5

Security agreement

Answer 5

The agreement between the debtor and the secured party that creates the security interest.

Question 6

Security interest

Answer 6

An interest in personal property or fixtures which secures payment or performance of an obligation.

It is a contingent property interest in the debtor’s collateral that the debtor grants to the creditor.

Question 7

When the contingency, which is _______________, occurs, the property interest:

Answer 7

springs to life and the creditor has rights in the debtor’s collateral.

Question 8

There are no creditor rights until:

Answer 8

you default.

Question 9

Collateral

Answer 9

The property subject to a security interest.

Property that the secured party can repossess upon default to insure that the debit is paid.

Question 10

2 Types of Purchase Money Security Interest (PMSI)

Answer 10

(1) Secured party sells debtor collateral on credit and retains a security interest in the item sold.
(2) An enabling loan: a loan to a debtor that enables the debtor to buy specific collateral, and the creditor takes a security interest in the specific collateral.

Note: the credit or loan proceeds must actually be used to acquire the collateral.

Question 11

After-acquired property clause

Answer 11

A secured party will want to obtain a security interest not only in debtor’s present property, but also in property that the debtor will obtain in the future. This is permissible. Security agreements typically contain an after-acquired property clause.

Question 12

Future advance clause

Answer 12

A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. This is permissible. Security agreements typically contain a future advance clause, in which case a new security agreement is not needed when a future advance is made.

Question 13

Attachment

Answer 13

Deals with those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor.

Once a security interest attaches, it is effective against the debtor and the creditor has all of the rights of a secured creditor under Article 9.

Question 14

A creditor is not a secured creditor until:

Answer 14

attachment.

Question 15

Perfection

Answer 15

Deals with those steps legally required to give the secured party an interest in the collateral that is effective as against the world.

In general, perfection is the process of giving public notice of the security interest to the world.

Question 16

Financing statement

Answer 16

Document generally used to provide public notice of the security interest, and so to perfect the security interest.