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26 Cards in this Set
- Front
- Back
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DEFINE
security interest |
interest creditor has in debtor’s property (collateral) in order to secure payment of debt
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LIST
classification of goods |
Farm products: crops, livestock, supplies used/produced in farming operations; products of crops/livestock in unmanufactured states if they are in possession of a debtor engaged in raising, fattening, grazing
Inventory: goods held for sale or lease, raw materials, supplies used up in business, if not farm products Consumer goods: goods used or bought for use primarily for personal, family, household purposes Equipment: every other good |
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DEFINE
farm products |
Farm products: crops, livestock, supplies used/produced in farming operations; products of crops/livestock in unmanufactured states if they are in possession of a debtor engaged in raising, fattening, grazing
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DEFINE
inventory |
Inventory: goods held for sale or lease, raw materials, supplies used up in business, if not farm products
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DEFINE
consumer goods |
Consumer goods: goods used or bought for use primarily for personal, family, household purposes
Cannot define “consumer goods” in security agreement; insufficient by itself |
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DEFINE
equipment |
Every other good
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After-acquired property exception for consumer goods
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After-acquired property clause not allowed in consumer goods acquired more than 10 days after SP gives value
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DEFINE
attachment |
Attachment occurs when 1) secured party gives value, 2) debtor has rights in the collateral, and 3) debtor either authenticates a security agreement describing the collateral or else gives possession of the collateral to the secured party under an oral security agreement (pledge)
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Security agreement requirements
(4) |
Must be written, authenticated by the debtor, it must grant or create a security interest, and it must identify the collateral in which interest is granted (see above)
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DEFINE
PMSI / types of |
Purchase-money security interest secured repayment of loan or credit that enabled debtor to buy the collateral
2 types: seller-PMSI (SP sells debtor collateral on credit); lender-PMSI (3rd party finances specific purchase) |
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LIST
types of perfection |
By possession
By filing |
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DEFINE
perfection by filing |
1) authorized by debtor, 2) give names/address of SP and debtor; 3) indicate the collateral
Signing of financing statement not required; can sign security agreement and it’s OK (authorized) Trade name filings not valid if a real person Consequence of ineffective filing is security interest is not perfected; security interest still effective against the debtor, however, so long as it has attached |
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LOCATION
of filing |
Department of Licensing
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Rule regarding filing/incorporation of debtor's business
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Incorporation of debtor’s business: perfected security interest automatically extends to all collateral transferred to corporation and all collateral acquired for 4 months after debtor became corporation; creditor must refile for anything acquired after 4 months
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FINANCING STATEMENT length of validity
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5 years
Continuation statement can be filed within 6 months of lapse |
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PRIORITY
Unperfected vs. unperfected |
Between two unperfected SIs, the first to file has priority
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PRIORITY
Perfected vs. unperfected |
A perfected security interest has priority over any unperfected security interest
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PRIORITY
Perfected vs. perfected |
Between two perfected secured parties, the first to file or perfect has priority unless #2 has super-priority
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PRIORITY
Perfected vs. PMSI |
Secured party with PMSI in non-inventory will have priority over earlier filed interests if she perfects before or within 20 days after the debtor receives possession of the collateral
If collateral is inventory to the debtor, then before the debtor receives possession, the PMSI party must both 1) give written, signed notice to secured parties of record describing the collateral and 2) file |
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BFP rule
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Unless exception, if collateral is sold without the secured party’s consent: 1) buyer in good faith will take collateral free from an unperfected security interest in the collateral; 2) buyer in good faith will take collateral subject to a perfected security interest
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BFP exception for when PMSI “relation back” defeats “gap BFP”
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Filing within 20 day grace period causes perfection to “relate back” to date the debtor received possession
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BFP exception for BIOCOB
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BIOCOB takes free from perfected security interest in goods purchased; BIOCOB is one who buys 1) in good faith and without knowledge that the sale violates a security agreement, 2) in ordinary course of seller’s business, 3) from a seller in the business of selling collateral of that kind
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PRIORITY
of proceeds |
SI attached to sold collateral will automatically attach to the proceeds and will have the same priority
SI perfected by filing will remain perfected in cash proceeds for as long as they remain identifiable, i.e. until they become untraceable or the debtor spends them |
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Repossession rule
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Upon debtor’s default, secured party may repossess the collateral if it can be done without breach of the peace. Otherwise it must use judicial repossession (replevin).
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After repossession selling rule
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After repo, secured party may sell collateral (privately or auction) only if 1) it gives written, signed notice of sale to debtor and any secured party of record and 2) if every aspect of the sale is commercially reasonable
Presumed 10 days is reasonable notice |
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Proceeds of sale upon repossession
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Proceeds of the sale are applied in order 1) to the expenses of the sale, 2) to foreclosing party’s unpaid debt, 3) unpaid debt of any junior secured party, 4) any surplus if any to debtor. If sale does not produce sufficient proceeds to repay the debt and expenses in full, debtor is liable for deficiency
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