Automatic Perfection of a Security Interest in Goods
Perfection of a Security Interest with Filing or Possession of Collateral
Written by Jason Gordon
Updated at July 6th, 2021
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Table of Contents
What is automatic perfection of a security interest?Discussion QuestionPractice QuestionAcademic ResearchWhat is automatic perfection of a security interest?
In certain types of transactions, a secured party's interest in collateral is automatically perfected without filing a financing statement and without taking possession or control of the collateral. This is known as automatic perfection. Depending upon the nature of the collateral, automatic perfection may be permanent or only last for a temporary period. Temporary automatic perfect allows a party a window of time to undertake procedures to permanently perfect the security interest. Below are the most common types of automatically perfected security interest:
- Purchase Money Security Interests in Consumer Goods,
- Purchase Money Security Interests in Non-Consumer Goods,
- Perfection in Proceeds from the Sale of Goods, and
- Assignments of Accounts Receivable and Contract Rights.
Each of these types of security interests and the automatic perfection attributes are discussed in a separate lecture.
Next Article: What is a "Purchase Money Security Interest" in Consumer Goods? Back to: Secured Transactions
Discussion Question
What do you think is the justification for allowing automatic perfection of security interests in certain types of goods? Do you think it is necessary to allow for automatic perfection of security interests in the above types of goods?
Practice Question
Carly finances the sale of goods to Derek. She is curious as to whether the sale is perfected or no. What information do you need to know to determine whether her security interest is perfected?