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35 Cards in this Set
- Front
- Back
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Governing Law:
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UCC Art. 9
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Scope of Art. 9
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1.CONSENSUAL (not mechanic’s lien or statutory lien)
2.SECURITY INTERESTS IN 3.PERSONALTY (e.g. goods) OR FIXTURES |
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How do you distinguish types of collateral?
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Distinguish based on use of the debtor:
a)Consumer goods b)Equipment c)Inventory d)Farm products e)Fixtures |
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What types of collateral are permitted?
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i)May be tangible or intangible, incl.
a)Patent/trademark/copyright b)Stocks/bonds/mutual funds c)Proceeds from the sale of collateral d)Accounts receivable e)Promissory notes & drafts (see Commercial Paper) |
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A floating lien is called an
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"After-acquired collateral clauses”
& is enforceable. |
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How is a security interest created?
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Attachment (creates enforceable interest)
+ Perfection (puts world on notice) |
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To Attach:
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i)Value must be given by creditor
ii)Security agreement (i.e. contract or record) must evidence the transaction (not required if secured party is in possession of the collateral) iii)Debtor must have rights in such collateral |
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To Perfect:
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1) Secured party takes possession
2) Secured party filed notice in public record 3) Automatic if secured party holds a PMSI in consumer goods |
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A PMSI is
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purchase money security interest
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FILING NOTICE: What document must be filed?
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May file security agreement (unlikely) or a “Financing Statement”
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FILING NOTICE: Where should it be filed?
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With Secretary of State where debtor is located (principal residence), unless attached to realty (e.g. timber, minerals, fixtures), in which case the county where the realty is located.
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FILING NOTICE: What format is required?
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Filing is “media neutral” (may be done electronically or in paper format)
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FILING NOTICE: What information should be given?
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Name & address of debtor & creditor
Description of collateral (general descriptions, e.g. “all D’s assets” are OK) |
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Priority of Interests
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i)Buyer in the Ordinary Course
ii)Perfected Attached Creditor iii) Lien Creditor iv)Non-Ordinary Course Buyer v)Attached Unperfected Creditor vi)General Unsecured Creditor |
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Who is a lien creditor?
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- unsecured creditor who gets judicial lien
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Who is a buyer outside the ordinary course?
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buys outside normal stream of commerce, e.g. a guitar from a mechanic
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WIthin each class of priority, how are interests ranked?
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1ST IN TIME = 1ST IN RIGHT (within each class)
Early filing is encouraged – can file even during negotiations, and any interest will relate back to the earlier filing |
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PMSI HOLDERS vs. AFTER AQUIRED COLLATERAL FINANCIER - Who wins?
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EQUIPMENT -> PMSI if file properly w/in 20 days of debtor's possession of the collateral
INVENTORY -> A PMSI if file properly & notifies the holder of floating lien BEFORE debtor takes possession |
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WHAT IS BREACH (of a ecured trans)?
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Defined in the security agreement, not Art. 9 (i.e. whatever the security contract or record says it is)
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CREDITOR’S OPTIONS TO OBTAIN PROPERTY:
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1) Self-help repossession
2) Judicial repossession |
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WHEN IS SELF-HELP PERMISSIBLE?
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As long as the creditor does not breach the peace, i.e. does not do anything likely to provoke violence
a)Breach of the peace incl. taking over debtor’s objection (a meek “no” will suffice) or using constructive force by misuse of the color of law (e.g. repo man wears police uniform) b)If collateral is in the debtor’s home -> must have contemporaneous debtor consent |
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Judicial repossession is called
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a “writ of replevin”
(Sheriff will repossess the property and deliver to the secured party) |
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CREDITOR’S OPTIONS WHEN IT HAS POSSESSION:
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1) Strict foreclosure
2) Sale 3) Possible deficiency judgment |
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Strict foreclosure =
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secured party retains collateral in full satisfaction of the debt (i.e. debt is discharged)
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Strict foreclosure - Noticec Requirement
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CONSUMER GOOD -> debtor & any secondary obligors
ANYTHING ELSE -> debtor, secondary obligors, perfected creditors and any other secured parties who have told the foreclosing party of their interest |
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Strict Foreclosure - 60% Rule:
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If collateral = consumer goods and the debtor has paid 60% of the loan (or, if PMSI, the purchase price), strict foreclosure is not allowed.
Must sell w/in 90s or be liable for conversion |
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Every aspect of sale of collateral must be
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Commercially reasonable, including notice.
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Sale of collateral may be public or private, BUT
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Secured party may not buy the collateral at a private sale
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Sale of collateral - Notice Requirement
PARTIES |
Notice must be sent to the same parties as strict foreclosure notice
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Sale of collateral - Notice Requirement
TIMING |
If notice is sent 10+ days before time of sale, timing is presumptively reasonable. If shorter -> commercially reasonable standard applies.
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Sale of collateral - Notice Requirement
To be commercially reasonable, notice must incl (re: PUBLIC SALE) |
must include time & place of sale
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Sale of collateral - Notice Requirement
To be commercially reasonable, notice must incl (re: PRIVATE SALE) |
date after which the item will be sold
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Sale of collateral - Notice Requirement
To be commercially reasonable, notice must incl (re: CONSUMER GOODS) |
how to calculate any deficiency & how debtor can redeem
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If secured party sells at a low price to an inside buyer,
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Price used to determine any deficiency will be MFV (amt that an independent third party would have paid)
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DEBTOR’S RIGHT OF REDEMPTION:
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Debtor may redeem property any time before it is sold or strict foreclosure is completed by paying the amount owed + interest + creditor’s reasonable attorney’s fees.
*Acceleration clauses are enforceable. |
