Secured Transactions

Secured Transactions Financing Statement Elements- (required for perfecting a security interest) • • • • •

Names of debtor and secured party Signature of debtor Address of secured party where info may be obtained Mailing address of debtor Description of the collateral

Attachment Elements (all are required) 1. Value given by secured party 2. Debtor attains rights in the collateral 3. Agreement in writing, unless creditor has possession of the collateral. •

Note: Debtor must have rights, but need not have title to collateral

Perfection Methods 1. Filing a financing statement a. Required method for pure intangibles, A/R b. Duration = 5 years (must be renewed w/in 6 months of expiration) c. Termination Statement = debtor may request this of creditor once debt is paid d. Location = Determined by debtor’s location e. Elements i. Debtor’s name and address ii.Creditor’s name and address iii.Collateral Description (sufficient to identify the goods) iv.Debtor’s signature 2. Possession of collateral by creditor a. Required method for cash, negotiable instruments, and nonnegotiable docs of title i. NOTE: Negotiable docs of title can be perfected via possession or filing. b. Filing not required 3. Automatic Perfection by law a. To Give Creditor Time to Gain Possession—Temporarily for 20 Days (applies to instruments & negotiable docs of title) b. For Release of Possession—Temporarily for 20 Days c. Because Collateral Is Proceeds of Perfected Collateral— Temporarily for 20 Days d. PMSI- Consumer Goods- Permanent i. Possession or filing NOT required, automatic perfection occurs upon attachment ii.Does not apply to collateral controlled by a title statute (e.g., motor vehicle registration).

Secured Transactions iii.If the consumer good is to become a fixture, the secured party must file to perfect her/his interest over collateral after it becomes affixed to real property iv.Not good against a subsequent bona fide purchaser who buys the goods from the original consumer, unless the purchase money secured party has filed a financing statement covering the goods e. Random, Isolated, Casual Assignment of Account(s) Receivable—Permanently (exception to requirement for filing financing statement) 4. Field Warehousing (collateral on debtor’s premises w/ bonded warehouseman) 5. Consignment for sale of goods •

Moving collateral to new jurisdiction -> Original creditor has 4 months to re-file in new county

Priority Among Parties • • • • • • •

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Buyer in ordinary course of debtor’s business (BOC)- will prevail against perfected and unperfected creditors UNLESS: Farm Products BOC knows goods should not be sold at all (bad faith) Unperfected creditors & non-BOC BOC prevails if: 1)Gives value, 2)Takes Delivery, 3)No knowledge of security interest Perfected creditors & non-BOC Creditor prevails unless exception occurs…  Failing to file financing statement for items automatically perfected  HDC obtains collateral Chattel Paper = Promissory note + Security Agreement Multiple Article 9 Creditors (competing for same collateral) Both unperfected = First to attach wins Both perfected = First to file financing statement wins  If perfected by other method, whoever perfected first wins Lien Creditors: interest in collateral by statute or judicial process VS Article 9 Creditor: First in time (aka ‘perfect’) generally wins Artisan’s Lien: Defeats Article 9 creditors (must have possession of collateral!) Commercially Reasonable Manner (Sale of collateral) Usual manner @ current price May deduct expenses necessary to dispose of collateral Time Limit on Disposition of Collateral If Debtor pays >60%, in case of interest in consumer goods (PMSI), secured party must sell the collateral w/in 90 days

Secured Transactions • Retention of Collateral- allowed, but must send notice to other secured parties. If no objections in 20 days = OK  Notice not required for consumer goods • 1. 2. 3.

Disposition Order Expenses related to disposal Debt owed to secured party Debt owed to any other junior security holders