Section 20: Secured Transactions

Question 1

Types of Collateral

Answer 1

• Tangibles
  
  • Inventory
  • Equipment
  • Consumer goods
  • Chattell paper
• Intangibles
  
  • Accounts
  • Negotiable instruments

Question 2

Purchase Money Security Interest (PMSI)

Answer 2

• An interst in personal property or fixtures that secures payment of an obligation that is:
  
  • Taken by the seller of the collateral to secure all orpart of its price, OR
  • Taken by a person who loans money or extends credit to enable the debtor to acquire the collateral

Question 3

The Creditor would like to protect their interest from several different parties (DOTS)

Answer 3

• Debtor - only needs attachment
• Other creditor claiming an interst in the same collateral
• Trustee in Bankruptcy
• Subsequent purchaser from the debtor without knowledge of perfection

Question 4

Attachment

Answer 4

• Gives the secured party the right to repossess collateral, when the debtor doesnt pay the secured debt
• In order to attach, all 3 must occur
  
  • Property owned by the debtor (“rights”)
  • Interest is created
    
    • Signed security agreement
      
      • A reasonable description of the ollateral
      • Signed by the debtor, OR
    • Take possession (pledge as collateral)
  • Give value to the debtor

Question 5

Judicial Lien

Answer 5

Court orders certain property to be made available to the plaintiff to satisfy a claim against the defendant in a case

Question 6

Statutory Lien

Answer 6

Service person who repairs personal property is given rights by legal statute in the property in the form of an artisan’s lien until the owner pays for the repairs

Question 7

Garnishment

Answer 7

Creditor obtains a judicial order allowing them to be paid a portion of the debtor’s wages out of each paycheck directly from the debtor’s employer

Question 8

Perfection

Answer 8

• File a financing statement
  
  • A listing or description of the types of collateral
  • Signature and address of debtor
  • Name and address of creditor
• Automatic Perfection
  
  • A PMSI in consumer goods is automatic
    
    • Loophole: debtor sells the consumer goods to another good faith consumer
    • To close the loophole, the creditor must file a financing statement w/i 20 days of attachment
      
      • applies to equipment, not inventory
• Take possession of the collateral