Secured Transactions: Classification Of Collateral

Front 1

* Importance of collateral classification

Back 1

Many rules regarding perfection, priority, repossession, resale, etc., depends on the type of collateral involved

Mutually exclusive: item can only be one collateral type

Debtor's perspective (use) is determinative

Front 2

Goods, generally

Back 2

1) Movable items & fixtures

2) Specific Inclusions:
- Standing timber; growing crops; unborn young of animals

3) Specific Exclusions:
- Money; minerals before extraction (still real property); collateral that fits other categories

Front 3

Classifications of Goods

Back 3

Consumer Goods
Equipment- business
Inventory
Farm Products
Multiple Uses- principal use determinative

Front 4

Consumer goods

Back 4

Personal, family, or household purposes

Examples: everything you own

Front 5

Equipment- Business Purposes

*Default Category*

Back 5

Goods used or bought for use primarily in business (including farming, professions)

Includes goods bought by a nonprofit or gov. subdivision/agency

Front 6

Inventory

Back 6

1) Goods held for sale or lease in the ordinary course of business

2) Raw material & work in progress

3) Consumed materials

Front 7

Farm Products

Back 7

Ex: Chickens, wheat, crops, livestock

To be a farm product, 2 requirements:

1) In possession of the farmer engaged in farming operations, and
2) Unmanufactured condition "raw"

Front 8

Multiple Uses

Back 8

Principal use determinative

Front 9

Semi-Tangible and Intangible Collateral

Back 9

Instruments
Documents
Chattel Paper
Account
Deposit Accounts
Investment Property
Commercial Tort Claims
General Intangibles

Front 10

Instruments

Back 10

Represent money.

Ex: Promissory notes, CODs, checks, drafts

Front 11

Documents

Back 11

Written or electronic representation of goods, that is, documents of title under Article 7

Warehouse Receipt: goods in storage

Bill of Lading: goods in transit

Front 12

Chattel Paper:

on paper: tangible
electronic: electronic

Back 12

Single writing or group of writings evidencing 2 things

1) Monetary obligation (promissory note) PLUS
2) Security Interest in or Lease of Goods

Front 13

Account

Back 13

Any right to payment of $ for goods sold or leased or for services rendered NOT evidenced by an instrument or chattel paper.

Typical accounts receivable of a business- what your clients will owe you. Includes contract rights not yet earned by performance. Includes computer software license fees and credit card receipts.

Front 14

Deposit Accounts

Back 14

Accounts with a financial institution

ex: checking & savings accounts

Front 15

Investment Property

Back 15

Ex: stocks, bonds

Front 16

Commercial Tort Claims

Back 16

Business tort claims that do not involve personal injury

Ex: unfair competition

Front 17

General Intangibles

Back 17

Any other type of personal property, except money.

Ex: copyright, patents, trademarks, goodwill, soul

Front 18

Proceeds

Back 18

Whatever received upon the sale, exchange, collection or other disposition of collateral or proceeds

Proceeds may include collateral a creditor could not have a security interest in if originally used as collateral, such as cash