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29 Cards in this Set

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What article of the UCC governs secured transactions?
Article 9 of the UCC
What is the definition of a "secured transaction"?
It is security for performance of an obligation
A security interest is...
the right to keep/sell the collateral if the debtor defaults on his obligation to the creditor.
What is a "purchase money security interest"?
A PMSI is where a creditor sells the goods to the debtor on credit, retaining a security interest in the goods, or the creditor advances funds used to purchase the goods.
There are 16 types of collateral...name them
1. Consumer Goods, 2. Farm Products, 3. Inventory, 4. Equipment, 5. Instruments, 6. Documents, 7. Accounts, 8. Deposit Accounts, 9. Health Care Insurance Receivables, 10. Chattel Paper, 11. Electronic Chattel Paper, 12. Letter of Credit Right, 13. Commercial Tort Claims, 14. General Intangibles, 15. Investment Property, 16. Proceeds
What is collateral?
Property subject to the security interest
What are "consumer goods"?
Goods used or bought for family purposes (refrigerator @ home)
What are "farm products"?
Crops, livestock, products of livestock - IN THE HANDS OF THE FARMER.
What is "inventory"?
Goods held for sale/lease or used short term (wrapping paper at deli, refigerator @ Sears)
What is "equipment"?
Goods used in business LONG TERM - refrigerator @ McDonalds
When collateral is used at home AND at work, what type of collateral is it?
Primary use controls - if 5/7 days it's at home, then it is "consumer goods".
When collateral changes use, what type of collateral is it?
Original use controls
When a farm product is processed, what type of collateral is it?
It becomes inventory once processed
What is chattel paper?
Writing evidencing (1) obligation and (2) security interest (basically stating that if no payment, you get the item back).
How does a secured transaction take place?
Step 1: Creation - giving of possession OR security agreement
Step 2: Attachment - secured party must give value (e.g. loan money) and debtor must have rights in the collateral.
What "3rd step" must a creditor take to get rights against others besides the debtor?
PERFECTION - 5 methods to it:
(F.P.C.A.T. - (First Place Catches A Title)
1. Filing
2. Possession - holding chattel paper, instrument, etc.
3. Control (never tested)
4. Automatic - perfected when attached (PMSI in consumer goods)
5. Temporary
For perfection, if a creditor chooses to "filing" - what must he do?
(i) file the financing statement (names, addresses, and description of collateral - can be SUPER generic). Name must not be "seriously misleading" must be able to find using FILING OFFICE'S SEARCH LOGIC.
(ii) Filed at location of the debtor-generally w/ secretary of state (local filing for real estate related collateral, for organizations file in state where organized/do business/if more than one state doing business then where CEO is located.
(iii) Filing lasts 5 years (must renew w/in 6 months of termination debt.
For perfection purposes, what are the rules for temporary perfection?
1. Four months rule: have 4 months to re-file if the goods and debtor move to a different state or the organization changes it's name.
2. Twenty-Days Rule: For proceeds - security interest in proceeds from original collateral is continuously perfected for 20 days from the debtor's receipt of the proceeds. Will be continued beyone the 20 days IF:(1)“Same office” Rule (proceeds could be filed in the same office as original collateral). (2)Identifiable cash proceeds. (3)Creditor perfects within the 20-day temporary period (filing, possession, etc.) For instruments - new value given or delivery of collateral to debtor for disposition.
In a battle between a secured party and a lien creditor, who wins?
General rule: Lien creditors beat UNSECURED creditors. Exception: PERFECTION IS KEY! If secured perfected before the lien attached, they win.
In battle of Perfected Secured Party vs. Purchaser (buyer of goods) who wins?
Non-business buyer will prevail "garage sale rule" UNLESS secured party files after the new sale.
If business purchaser, secured party prevails because of automatic perfection.
If Buyer in ordinary course of business - purchaser wins even if secured party filed.
Who wins in secured party vs. secured party?
First to file gets priority EVEN if later party made advances first and first party knew it. EXCEPTIONS: Super-priority (2nd in time wins) - (i) PMSI for the inventory wins if gave notice to earlier perfected secured party BEFORE debtor got possesion.
(ii) PMSI for equipment and proceeds: if perfected b4 or w/in 20 days after debtor gets possession.
(iii) Purchaser of chattel paper w/ possession takes priority over secured party as proceeds of inventory.
Who wins battle over fixtures?
First to file or record prevails EXCEPT: PMSI secured party who makes fixture filing w/in 20 days will prevail over prior real estate filing (EXCEPTION TO EXCEPTION: construction mortagegee prevails so long as recorded b4 the goods became fixtures and goods became fixtures b4 the completion of construction).

Fuck thats alot to remember
Who wins battle over accessions?
Rule: First to file or perfect (PMSI has super priority). EXCEPTION: if accession became part of the whole asset subject to title, the security interest in the whole asset has priority over the security interest in the accession.
How does a secured party repossess collateral upon default (w/out going to court)?
Obtain possession w/out breaching the peace.
When secured party has possession of collateral and they are going to sell it, what steps must they take?
1. Use commercial reasonableness.
2. Notify - authenticated notice to the debtor (and any other secondary obligors). Must contain: (i) for NON-consumer goods: describe debtor/secured party, collateral, method of disposition, and time/place of disposition. (ii) for CONSUMER goods, liability for deficiency judgment, telephone # for redemption, and telephone # for additional info.
What happens to secured party if they don't comply w/ repossession requirements?
Liability for damages for loss caused by failure to comply (+ $500 per case). If consumer goods, 10% of purchase price and all interest charges to be paid over the life of the loan.
In non-consumer goods cases, how does acceptance of collateral in full (or partial) satisfaction work?
Parties agree to voluntary turnover in return for an agreed credit against the debt with the debtor acknowledging remaining deficiency.
In consumer goods cases, how does acceptance of collateral in full satisfaction work?
Parties can agree voluntary turnover in return for full satisfaction ONLY.
How do are proceeds of sale get applied to expenses?
First: expenses of retaking, holding, preparing, and disposing of collateral.
Second: Satisfaction of obligation secured by security interest
Third: Satisfaction of obligation by subordinate security interest if secured party received demand.
Fourth: Debtor or trustee