Vocabulary Flashcards
What is a secured transaction?
A secured transaction is a transaction intended to create a security interest in personal property or fixtures. It 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.
Look for: (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.
What is a sale on credit?
Sale where the buyer does not pay the full purchase price at the time of the sale
What is a security interest?
The agreement between the debtor and the secured party that creates the security interest.
What is a security interest?
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. When the contingency, which is default occurs, interest springs to life and the creditor has rights in the debtor’s collateral.
What are Purchase Money Security Interests (PMSI’s)?
- Secured party sells debtor collateral on credit and retains a security interest in the item sold (seller financed)
- An enabling loan (like for a car); 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.
What is an After-acquired property clause?
A secured party often 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
What is a Future advance clause?
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 (as in the hypo), in which case a new security agreement is not needed when a future advance is made.
What is attachment?
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. A creditor is not a secured creditor until attachment.
What is perfection?
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.
What is a Financing statement?
Document generally used to provide public notice of the security interest, and so to perfect the security interest.
