Secured Transactions

Question 1

What are Secured Transaction Attachments?

Answer 1

When a security interest is legally enforceable
o Secured interest must be supported by consideration given
o Debtor must actually own the rights to the collateral or have possession
o Secured interest must be recorded

Question 2

What is Perfection of Interest?

Answer 2

1. Gets higher priority over others claiming rights to collateral after the perfection takes place
2. Attachment must take place first before Perfection
3. Perfection occurs by:
   o Filing Financing Statement
   o Possessing the Collateral
4. Automatically Perfected when
   o Store sells a consumer good on credit
   Store retains security interest
   o A bank finances the purchase of a consumer good
   Bank retains security interest

Question 3

What are Priority Rules?

Answer 3

o If two parties are perfected, then the first one to file wins
o If neither party is perfected, then the first one to attach wins

Question 4

What are Creditors holding a lien?

Answer 4

1. Holds priority over claims to collateral vs. unperfected security interests
2. Beats perfected security interests filed after lien attachment
   o Exception: Purchase money security interest, which has a 10 day grace period to be filed
3. Buyers purchasing in the ordinary course of business are immune from security interests held by merchants