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43 Cards in this Set
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"secured transaction" |
transaction intended to create a security interest in someone's personal property |
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to identify secured transaction, look for |
1. credit transaction of some kind AND 2. an agreement that designates some of the debtor's personal property/fixtures as collateral to secure the debt *look for substance, not form |
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types of collateral |
1. goods 2. quasi-tangible property 3. intangible property |
3 categories |
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collateral: goods |
all things that are movable at time security interest attaches consumer goods (for use in personal/family/household) inventory (held for sale or lease under service K; material used or consumed in business) farm products (crops, livestock, their products, supplies in farming) equipment (non-inventory goods for use in business) |
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collateral: quasi-tangible property |
instruments (negotiable instruments (drafts/notes/checks) evidenced by writing transferred by delivery w/necessary endorsement or assignment in regular course of business) chattel paper (writing evidencing monetary obligation and a security interest in specific goods) investment property (stocks, bonds, mutual funds, brokerage accounts) |
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collateral: intangible property |
account (any right to payment for property sold/leased or services rendered not evidenced by instrument or chattel paper; right to payment under real estate K, cc agmt., insurance, etc.) deposit account (checking & savings accounts maintained at a bank) general intangibles (residual catchall) |
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attachment |
creating a security interest need : 1. secured party to give value 2. debtor has right to collateral 3. security agreement |
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written security agreement is required unless... |
the collateral is in the possession or control of the secured party pursuant to oral agreement |
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contents of a security agreement |
1. intent to create a security interest 2. authentication by the debtor (usu. signature) 3. description of the collateral (can include after acquired property except consumer goods acquired more than 10 days after secured party gives value) |
3 things |
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to obtain security interest, the secured party must have given... |
value (any consideration sufficient to support a K) *can relate back to preexisting debt *can reach forward to include future advances |
security interest is a K |
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proceeds of collateral |
*whatever the debtor receives upon the sale, exchange, collection, loss, or other disposition of collateral or its proceeds (incl. licensing royalties) *right thereto automatically attaches for secured party unless security agreement states otherwise >> is temporary (20 days) UNLESS proceed = cash OR secured party perfects finance statement in proceeds w/in 20 days |
what is it and why does it matter |
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perfection |
establishing of priority between secured parties with concurrent interest in a particular collateral not necessary to make interest valid between debtor & creditor but for who takes first in event of debtor's bankruptcy requires secured party giving value to be effective |
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methods of perfection |
*automatic perfection (limited circumstances - e.g. purchase money security interest) *perfection by possession of collateral by secured party (lasts only as long as possession is retained; often not practical; only way to perfect interest in cash) *perfection by control (for intangibles) *perfection by notation on title (required for certain goods subject to title laws - e.g. cars) *perfection by filing a financing statement (most common; must pay fee and have debtor's name, secured party's name, and description of the collateral) |
5 ways Miranda Lambert |
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rights & duties of secured party who takes possession of goods for the purposes of attachment or perfection |
*use reasonable care in storing & preserving the collateral >> may charge debtor for any reasonable expenses incurred *risk of accidental loss or damage is on debtor to extent of any insurance coverage deficiency *may hold as additional security any increase in value or profits from the collateral EXCEPT money *may repledge the collateral (i.e., the secured party may use the collateral as collateral for an obligation under which the secured party is a debtor) |
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PMSI |
purchase money security interest usu. involves: (1) a debtor buying an item on credit from a seller, with the seller being the secured party; OR (2) a debtor using a loan from a bank directly to buy an item from a seller, with the bank being the secured party |
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more about a financing statement |
*lasts 5 years *filed where debtor lives (or where land is if real property) *can be filed before security agreement entered into |
where, how long, when |
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renewing a financing statement |
*only the secured party must authorize the continuation *continuation statements may be filed w/in last 6 months of the prior filing * continue the effectiveness of the filing for 5 more years. |
who, when, how long |
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terminating a financing statement |
*secured parties gen. aren't obligated to terminate financing statements *if financing statement was unauthorized or debt has been repaid, termination statement must be provided or filed within 20 days of a demand |
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terminating a financing statement - consumer goods |
*secured party must file a termination statement w/in one month after there is no obligation OR *w/in 20 days if debtor demands it |
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priority - secured party v. secured party |
first to file or perfect, whichever comes first, has priority pure race, notice is irrelevant |
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priority - secured party v. purchaser of collateral |
*if sale authorized by secured party >> buyer takes free of interest *if sale unauthorized >> interest in collateral continues, buyer takes subject to interest UNLESS --debtor made sale as ordinary course of business --interest un-perfected & buyer didn't have notice --buyer & seller are consumers and buyer didn't have notice |
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priority - secured party v. judgment lien |
look at when perfection occurred v. when lien attached un-perfected interest < lien perfected interest > lien |
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priority - PMSI v. secured party collateral = non-inventory goods |
PMSI has priority if perfect at time of debtor's purchase or w/in 20 days thereafter |
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priority - PMSI v. secured party collateral = inventory goods |
PMSI has priority if before debtor gets possession, PMSI perfects and gives notice to competing interests |
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priority - PMSI v. judgment lien |
PMSI has priority if file w/in 20 days of debtor getting possession of the collateral |
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priority - secured party v. statutory lien |
statutory lien claimants usu. have priority as long as complied w/state law in creating the lien |
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"default" |
failure to perform or pay the obligation when it is due may also be defined w/additional terms in security agreement |
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self help repossession |
after default, secured party entitled to take possession of collateral >> can do so w/o judicial process if can do so w/o breaching the peace |
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breach of peace |
* (threat of) violence *home invasion *property damage *repossession made over any protest by debtor (even if no violence or significant disturbance occurs) |
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if self help isn't available |
secured party can use judicial process (replevin action) to get collateral >> can't do if debtor has declared bankruptcy
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retention of collateral |
secured party can give notice to debtor that keeping collateral in full or partial satisfaction of debt >> debtor can write to object w/in 20 days
*can't keep if consumer goods that debtor has paid 60+% for >> must sell & is full satisfaction |
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resale of collateral |
*must give reasonable notice to debtor & other secured parties *sale must be commercially reasonable *secured party can buy the collateral as long as through fair channels *debtor gets any surplus |
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resale of collateral - notice requirements |
(i) description of debtor &the secured party (ii) description of the collateral (iii) the method of sale (iv) a statement that the debtor is entitled to an accounting AND (v) the time & place of public sale or the time after which a private sale will be made |
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resale of collateral -notice requirements - consumer goods |
(vi) description of recipient's liability for a deficiency (vii) phone number from which recipient can discover the cost of redeeming the collateral AND (viii) phone number or address from which recipient can get additional info re: the sale |
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right to redeem |
any time before secured party resells collateral or retains it as payment, debtor may redeem by fulfilling all obligations secured by the collateral |
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fixture |
personal property attached to real estate w/intent that it becomes a permanent part of the real estate |
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perfection in fixtures |
fixture filing in office where mortgage on the real estate would be filed |
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priority in fixtures |
perfected security interest in fixture > any real estate interest subsequent to perfection
perfected security interest in fixture < properly recorded prior real estate interest UNLESS security interest is PMSI AND perfect before goods become fixtures or w/in 20 days thereafter UNLESS prior real estate interest is a construction mortgage |
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"accession" |
good that is installed in or affixed to other goods of the debtor (e.g. new tires on a car) |
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priority in accessions |
same priority rules apply but where goods are covered by title, perfected interest in the good (e.g. car) > interest in accession (e.g. tires) |
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right to remove accessions |
secured party w/priority in accession has right to remove accession after default >> may owe other secured parties for damage done by removal but not for diminution in value
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when can secured party describe collateral as "all of the debtor's assets" |
in a financing statement NOT in security agreement |
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"garage sale" rule |
debtor acquires consumer goods via PMSI >> sells good(s) >> buyer in turn resells good(s) to other consumer >> second buyer takes good(s) free of security interest if buys w/o knowledge of obligation, for value, before a financing statement filed |
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