Secured Transactions

Question 1

What are the elements of perfection?

Answer 1

1. Attachment

2. Act of Perfection

Question 2

What are the elements of Attachment?

Answer 2

1. Creditor gives value
2. Contract–Security Agreement
3. Debtor has rights in the collateral

Question 3

What are acts of perfection?

Answer 3

1, Possession by the Creditor

2. Filing of FINANCING STATEMENT
3. Automatic–Temp/Permanent–attachment alone is sufficient
4. Control
5. Notation of the Security Interest on Certificate of Title

Question 4

What are the requirements of a Financing Statement?

Answer 4

1. Names of debtor and creditor
2. Address of debtor and creditor
3. Debtor’s authorization in an authenticated record. NO ORAL
4. Description of the collateral
5. Description of the Land if the collateral is Timber, Minerals, Fixtures, or crops

Question 5

What is the time period after Debtor changes their name does perfection remain with the security interest?

Answer 5

4 Months unless refiled under the new name

Question 6

What is the duration of a financing statement? & What is the exception?

Answer 6

5 Years. The exception is a recorded real property mortgage covering fixtures that continues until the mortgage is released or satisfied.

Question 7

What constitutes automatic perfection?

Answer 7

1. PMSI–> Getting a loan to buy a fridge and then using the loan money to buy the fridge. Bank has a PMSI in the fridge. ONLY FOR CONSUMER GOODS. Not fixtures or certificate of title items.
2. Assignment of Insignificant Amount of Debtor’s Accounts
3. Sale of Promissory Notes

Question 8

What is eligible for temporary automatic perfection?

Answer 8

1. Proceeds are automatically perfected for 20 days from the debtor’s receipt of the proceeds
2. New value for instruments, negotiable documents, and certified securities are automatically perfected for a period of 20 days from attachment.

Question 9

Who wins between a secured party and a Purchaser?

Answer 9

1. Purchaser wins if:
   a. Buyer gives value
   b. Buyer receives delivery of the item
   c. Buyer has no knowledge of the security interest at the time of delivery

Question 10

What does a PMSI do against a purchaser?

Answer 10

Takes priority over the gap purchaser if the PMSI creditor perfects within their 20 day limit.

Question 11

What is significant about a Buyer in the Ordinary Course of Business?

Answer 11

They can take collateral free and clear of any security interests if the following requirements are satisfied:

1. Honesty in fact and observance of reasonable commercial standards
2. Without notice of security interest violation
3. Purchase of goods that are NOT farm goods
4. It is an ordinary purchase—seller sells these items regularly
5. There is a security interest created by the seller
6. Creditor had not perfected by possession

Question 12

What about a Nonbuyer in the ordinary course of business? Aka future advances?

Answer 12

Can prevail over a secured creditor for future advance amounts made after the first of these events occurs:

1. Secured creditor obtains knowledge of the purchase
2. 45 days have elapsed from the date of the purchase

Question 13

What are the general priority rules regarding Lien creditors and secured/unsecured creditors?

Answer 13

1. If unperfected, Lien creditor wins priority. Unless it is a PMSI who is perfected within 20 days
2. If perfected, then secured creditor wins priority

Question 14

When it comes to fixtures, when may a secured party win priority?

Answer 14

1, Fixture was perfected before the real estate interest was recorded
2. It was perfected with a fixture filing

Question 15

What is the debtor’s right to redeem?

Answer 15

1. Creditor has not yet sold or entered into a contract to sell the collateral
2. Strict foreclosure has not yet occurred
3. Debtor has not waived the right to redeem after default
4. Debtor must tender fulfillment of all obligations secured by the collateral—not just late payments.
5. AND tender all of creditor’s reasonable expenses