4. Priority

Question 1

Cast of Characters

What are the six groups of creditors, in order of priority?

Answer 1

BPL NAG

1. Buyer in ordinary course
2. Perfect attached creditor
3. Lien creditor
4. Non-ordinary course buyer
5. Attached unperfected creditor
6. General unsecured creditor

Question 2

Cast of Characters

Who is a buyer in ordinary course?

Answer 2

Someone who purchases the collateral from merchant’s inventory

Question 3

Cast of Characters

Who is a perfect attached creditor?

Answer 3

Article 9 CR who perfects

Question 4

Cast of Characters

Who is a perfect attached creditor?

Answer 4

Article 9 CR who perfects

Question 5

Cast of Characters

Who is a lien creditor?

Answer 5

An unsecured CR who goes to court to enforce

Question 6

Cast of Characters

Who is a non-ordinary course buyer?

Answer 6

Someone who purchases the collateral from a non-merchant

Question 7

Cast of Characters

Who is an attached unperfected creditor?

Answer 7

Article 9 CR with an unenforceable interest, i.e. not filed or improperly filed

Question 8

Cast of Characters

Who is a general unsecured creditor?

Answer 8

Lender who takes no collateral

Question 9

_{PAC v the world}

Who beats a PAC in priority?

Answer 9

1. Earlier PACs
2. BIOCs
3. PMSI holders in X where PAC is an AACF and X is part of DR’s future inventory

Question 10

_{PAC v the world}

What is the general for priority?

Answer 10

First in time, first in right

Question 11

_{PAC v the world}

What is early filing, and how does it affect priority?

Answer 11

If a lender files during negotiations and the security interest later attaches, priority relates back to the date of filing

Question 12

_{PAC AACF v PMSI}

How is the contest set up?

Answer 12

• AACF lends money to A and gets security is A’s future business equipment/inventory and perfects
• A then acquires X from PMSI
• AACF and PMSI holder have a competing interest in X

Question 13

_{PAC AACF v PMSI}

When the collateral is equipment, what must PMSI-holder do to prevail over earlier AACF?

Answer 13

File properly within 20 days of A taking possession of X

Question 14

_{PAC AACF v PMSI}

When the collateral is inventory, what must PMSI-holder do to prevail over earlier AACF? How come?

Answer 14

File properly and notify AACF before A takes possession

To prevent AACF from being tricked into extending more credit on the basis of the new inventory which could ordinarily be sold