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70 Cards in this Set
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- Back
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A security agreement |
A record which describes the collateral, contains a granting clause and is authenticated by the debtor |
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Three ways for a creditor to create a security interest |
Security agreement, possession, control |
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Possession |
Possession of the collateral pursuant to an agreement that the possession is to secure a repayment of debt |
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Control |
Control of the collateral pursuant to a agreement that the control is to secure repayment of a debt |
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Secured transaction |
Any consensual transaction regardless of its form that is intended to create a security interest in personal property |
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Security interest |
An interesting personal property or fixtures to secure payment of a debt or performance of an obligation |
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Attachment |
A term used to say a security interest is in forcible against identifiable collateral. |
VCR |
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Methods of attachment VCR |
Value, contract, Rights in the collateral |
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Value |
Value given by the secured party to the debtor in exchange for the security interest (kind of like consideration for a contract that much more flexible) |
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A Contract |
A contract agreement that the security interest attach that is the oral or formal security agreement described above |
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Rights in the collateral |
The debtor must have been a frighten the collateral that she can give a security interest in the collateral to someone |
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After acquired property |
Collateral to be acquired in the future maybe the subject of security agreement. The security interest does not attach until the debtor gets right in the collateral when the debtor gets the after-acquired property, the secured interest immediately attach it.
Note: After acquired property clause is not permitted if collateral is consumer goods or commercial tort claims |
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When does attachment occur? |
Attachment occurs when the last of the three requirements of VCR is met no matter in what order and a matter how long it takes |
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Main categories of collateral classification |
Goods Documentary assets Financial assets Intangible assets |
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Primary use test |
If an item is used in several ways classify the item by the debtors primary intended use at the time of attachment |
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Goods |
Things that are movable and tangible at the time security interest attaches |
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4 categories of goods |
Consumer goods farm products inventory equipment |
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Consumer goods |
Goods which are acquired primarily for personal family or household use |
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Farm products |
Good used or produced in farming includes crops or livestock in unmanufactured state if in possession of a farmer. |
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Inventory |
Goods for sale or lease by a business also wrong materials to be processed materials used up or consumed in business |
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Equipment |
Goods used in business including equipment used in farming |
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Fixtures |
Goods attached to real property after purchase. They were once movable but no longer are. |
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Accessions |
Good to attach to other goods after purchase |
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Motor vehicles |
Motor vehicles and other goods subject to certificate of title and registration laws |
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Documentary assets |
A paper that's a formal embodiment of right to payment or an official title to other property where the paper is necessary to transfer the title. The piece of paper itself is the valuable thing. |
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Chattel paper |
I negotiable instrument connected with the security agreement |
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Indispensable writing |
It is necessary to possess the writing to collect the value it represents. |
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Types of documentary assets |
Includes documents, instruments, chattel paper and paper money |
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Financial assets |
Financial assets in a relatively liquid form located at a bank or other financial institution.
Includes deposit accounts investment property letter of credit right |
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Intangible assets |
Accounts, general intangibles and commercial tort claims
These may be noted in writing or other record but the physical writing is not needed to collect the value. |
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Accounts |
Right to payment for a monetary obligation that arises from the debtor sale or lease of property |
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General intangibles |
A catchall. Any personal property that does not fit into any other category.
Most often intellectual property such as patents, copyrights, liquor licenses or computer software |
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Proceeds |
Proceeds are whatever is received after disposition of the collateral the general rule is that the security interest automatically follows the outgoing collateral in the incoming proceeds |
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Purchase money security interest |
Security interest that arises because the lender provides the very money that permits the debtor to purchase the collateral. |
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Two ways to create a PMSI |
seller takeback PMSI secured party sales collateral to the debtor and takes a security interest in the collateral sold to secure the purchase price
third-party lender PMSI the secured party gives the debtor value for the debtor to buy specifically intended collateral from someone else and the dinner actually buys the collateral with the money loan and the lender takes a security interest in the collateral purchased. |
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Perfection |
Perfection is all about notice. it means giving notice of the security interest to third parties |
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Four basic methods of perfection |
Filing a "financing statement" (public record)
Possession not for intangible collateral
Control - for financial aspects of the debtor held by banks or brokers
Automatic perfection |
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General rule of perfection |
A security interest in most but not all collateral can be perfected either by filing or possession |
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When does perfection generally occur |
Generally when the last of all requirements for attachment have occurred and all applicable perfection requirements have occurred |
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PMSI perfection grace period |
If a PMSI secured party files within 20 days after the debtor receives possession of the goods, perfection of the PMSI relates back to time of attachment and squeezes out interest that arises between attachment and the filing |
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Perfection by filing a financing statement |
Filing occurs upon presentation of the financing statement for filing and tendering the filing fee or acceptance by A financing officer
FS's are good for 5 years and must be filed at the location of the debtor (MD: File with MD SDAT) |
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Info required in Financing Statement |
Name of debtor, name of secured party, description of collateral. Person filing must be authorized by debtor. |
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Termination statement |
The secured party must terminate its financing statement after the obligations secured have been paid and commitments to provide further credit has expired. 20 days after request by debtor |
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The effect of errors in the financing statement |
The financing statement is rendered ineffective if it contains a seriously misleading error in the debtors name |
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Perfection by possession |
Perfection starts with possession is taken but the secured party and ends been possession is given up or lost by the secured party.
A secret interesting paper money can only be perfected by possession |
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Perfection by control |
perfection starts in control of the pain but the secured party and ends and controls get an apartment for the secured party. Applies only to financial assets located at a bank or broker. The bank where a deposit account is maintained has automatic perfection in the deposit account. |
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Automatic temporary perfection |
A grace period for the secured party where they have perfection but later lose it |
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ATP change in governing law |
If The debtor moves residents to another state there is an automatic temporary perfection for four months in which time the SP may file in the new state and the SI relates back.
if the secured party does not found the new state secured interest is deemed never have been perfected |
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ATP- Change of debtors name |
If the secured party re-files within four months under the new name perfection remains if not the security interest remains effective into the future for all of debtors collateral held before or required within four months after the name change. |
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Seal of collateral to a person located in another state |
If the secured party files against the transferee in the other state in one year in the security interest remains continuously perfected the dates back to the filing of the original state. If the secured party does not file against the transferee the security interest becomes an perfected it is deemed never to have been perfected. |
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ATP-Proceeds |
The secured party has an automatic temporary perfection for 20 days on the incoming proceeds. But...the perfection continues after that (APP) if the secured party would file a financing statement for the incoming type of proceeds in the same office in which the financing statement for the original collateral is already filed. |
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Automatic permanent protection |
No filing or possession required ever
PMSI in consumer goods, assignment of a minor portion of account sales of payment intangibles promissory notes healthcare insurance receivables and certain financial assets identifiable cash and usually all non-cash proceeds |
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(Judgment) Lien creditor |
The holder of a judgment obtained by lien proceedings AND the sheriff levies or attaches the debtor's property to sell to satisfy the judgment (not merely a plaintiff who is money judgment) |
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Statutory lien creditor |
The states does he recognizes a lien for a specific type of creditor such as a mechanic |
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A trustee in bankruptcy |
DIP (Debtor in possession)=Either a debtor company that continues to operate after a bankruptcy filing or a court ordered trustee in bankruptcy proceeding. DIP has a lien on all of the debtors assets in mediately upon the bankruptcy filing |
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Person with an interest in real estate |
Relevant if the secured parties collateral is a fixture possibly craps timber etc. |
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Buyer in the ordinary course |
A good-faith purchaser without knowledge that the sale is in violation of the security interest buys goods in the ordinary course of business for memory chip in goods of the kind involved other than upon broker |
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Buyer of consumer goods |
A person who buys A consumer good for value for consumer purchases from the consumer cellar without knowledge of the security interest |
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Perfected versus perfected SP |
The first to file or perfect wins |
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LCr v Unperfected SP |
LCr always wins |
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LCr v subsequently Perfected SP |
LCr wins |
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LCr v prior perfected SP |
SP wins |
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PMSI v LCr grace period |
The PMSI 20 day grace period Permits relation back to defeat the lien creditor who arises between attachment of the secured interest and perfection by filing |
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Trustee in bankruptcy priority |
The trustee or D IP is treated me really is Alina credit or apply the lien creditor rules |
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Statutory lien creditor v prior perfected SP |
SLCr wins and less lien statute says SLCr loses |
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PWIRE v SI perfected by SDAT filing |
PWIRE always wins |
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SP v Buyer in ordinary course |
Buyer in the ordinary course has priority over any security interest created by the seller, even if prior and perfected |
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SP v Buyer of consumer goods |
A buyer of consumer goods has priority over any unfiled security interest even in automatically perfected PMSI secured party |
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SP v buyer of chattel paper or instruments |
The buyer of chattel paper or instruments has priority over prior perfected secured parties if the buyer has no knowledge of the secured interest or the security interest is claimed nearly as proceeds of inventory even if buyer has knowledge of the security interest |
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SP v Holder in Due Course |
HDC wins |
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