When an attachment of a security interest takes place?

Question 1

When an attachment of security interest takes place?

Answer 1

1- The secured party gives value
2- The debtor has rights in collateral
3- and one of the following is true:
- Secured party must possess the collateral
- Secured party must agrees to it
- Secured party must have control of certain types of collaterals
- Secured party must have a signed security agreement

Question 2

What is an After-acquired clause property clause in a security agreement?

Answer 2

After-acquired clause allows the secured party’s interest in such property to attach once the debtor acquires the property, without the need to make a new security agreement.

Question 3

For what an After-acquired clauses are used or not used?

Answer 3

They are used for:
- Inventory
-Account Receivable
- Equipment
Not used for/Not valid:
-Consumer goods
-Commercial tort claims

Question 4

Why Perfection of a security interest is important?

Answer 4

It establishes for a secured party priority over the claims that may be made by most subsequent secured creditors or other parties.

Question 5

What are the 3 primary ways to perfect an attached security interest?

Answer 5

1- By filing financing statements
2- Secured Party takes possession of collateral or in certain cases takes control
3- Automatic perfection can occur, but only with consumer good

Question 6

What is the best way to perfect a security in a negotiated instrument?

Answer 6

To take possession of the instrument

Question 7

Effect of Perfecting by filing a financing statement?

Answer 7

Purchasers from a merchant in the ordinary course of business takes the collateral free from any prior perfect security interest
Not true - When the purchaser knew that the merchant was selling the goods in violation of a financing statement

Question 8

What is Purchase Money Security Interest (PMSI)? Automatic Perfection

Answer 8

Arises when the secured party extends credit to the debtor to purchase a specific good and the secured party takes a security interest in that specific good——-that is Automatic Perfection

Question 9

What are the collateral under revised Article 9 of the UCC?

Answer 9

The collateral is generally Personal property or fixtures / Not real property

Question 10

Who can take goods free of any security interest whether perfect or not?

Answer 10

Buyers in the ordinary course of business.

Question 11

when the PMSI has priority over nonpurchase money security interest?

Answer 11

If it was perfect within 20 days after the debtor received the collateral.
It has priority over all of the others.

Question 12

When a good must be sold in case of repossession?

Answer 12

The good must be sold if the debtor has paid more than 60% of debt secured by the consumer goods

Question 13

What happens to a good faith purchaser in case of the disposition of collateral by a secured creditor after a debtor’s default?

Answer 13

A good-faith purchaser for value and without knowledge of any defects in the sale takes free of any subordinate liens or security interests.

Question 14

What are conditions for an attachment (All 3 must be met)

A security interest attaches to collateral and the creditor GRIPS the debtor’s property.

Answer 14

Creditor Gives value to debtor
Debtor has Rights In the property
Creditor takes Possession of the property or
obtains written Security agreement

Question 15

What are perfection conditions?
First Attach -
A creditor should perfect a security interest ASAP (as soon as possible)

Answer 15

Attached and one of the following:

• a financing Statement has been filed
• a PMSI is perfect Automatically when it attaches in consumer sale
• The Creditor has taken Possession of the property

Question 16

In what order proceeds from sale of repossessed property are distributed?

Answer 16

1- Reasonable expenses of sale
2- Pay secured party’s claim
3- Satisfy other secured claims in order of priority
4- Excess to debtor

Question 17

What is the effect of perfecting a security interest by filling a financing statement?

Answer 17

The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing. Not defeat all other parties who acquire an interest in the same collateral

Question 18

Can the security agreement be oral? Writing?

Answer 18

• May be oral if the secured party has possession or control of the collateral.
• Otherwise, It must be in writing and signed by the debtor
  Exception to signature is made if it is an authenticated electronic transmission

Question 19

What field warehousing is used for?

Answer 19

Field warehousing is used to Perfect security interest:

• Debtor keeps inventory on his/her premises under control of 3rd party such as bonded warehouseman or Secured party’s employee
• Secured party keeps control over inventory such as use of separate room or fenced -off portion with sign showing secured party’s control

Question 20

Can a Secured party collect if collateral consist of claims (receivable) ?

Answer 20

Yes, the Secured party has the right of collection from 3rd parties:

• SP may notify 3rd party to pay SP directly
• SP must account for any surplus & debtor is liable for any deficiency.
• SP may deduct his/her reasonable expense.