1. Secured Transactions Law

Secured Transactions Law

Playlist: 38 Videos: 83 Minutes


Topic Material

Secured Transactions Law (Intro)

Security Interests Explained


Topics: Learning Material

Introduction to Secured Transactions
Security interests are a cornerstone of finance and lending. Secured lending relates directly with the amount of risk a lender faces when extending credit to a borrower. A secured transaction is one in which a lender or seller acquires an interest in the property sold or purchased with the funds provided to the borrower or debtor. The law of secured transactions regulates the relationship between the secured lender and the borrower/debtor. It also regulates the relationship (or rights) between multiple secured lenders. This chapter introduces the concept of a security interest. It begins by exploring security interests in the context of real property before moving on to personal property. It examines the rights of the secured party and the debtor in numerous situations (or transactions) involving security interests. Notably, it explains the key concept of priority among secured parties. Priority is instrumental in assessing the risk to the secured party in a given transaction. For further written and video explanation, discussion and practice questions, see Secured Transactions Law (Intro)

What is a Security Interest
  • A form of property interest in real or personal property.
  • Assurance to a third party that the property owner will perform an obligation or pay a debt.
  • Money borrowed may be used to purchase the property securing the loan.
  • Allows for repossession and sale if debt not paid.

For further written and video explanation, discussion and practice questions, see What is a security interest?

Benefits of a Security Interest

Ability to recuperate some or all of the debt by repossessing and selling the collateral.

  • Strict Foreclosure
  • Foreclosure Sale
  • “right of redemption”

For further written and video explanation, discussion and practice questions, see What are the benefits of security interests for creditors?

Security Interests in Real Estate
  • Mortgages
  • Deeds of Trust
  • Land Sales Contracts

For further written and video explanation, discussion and practice questions, see What are the common types of security interest in real property (land)?

What is a “Mortgage”?
  • A loan that is secured by real property.

For further written and video explanation, discussion and practice questions, see What is a mortgage?

Security Interest Protects Mortgage Holder
  • Foreclosure
  • Deficiency Judgment
  • Right or Redemption

For further written and video explanation, discussion and practice questions, see How does a security interest protect the mortgage holder?

“Deed of Trust” vs “Security Deed”
  • A “deed of trust” or “security deed”,
  • Borrower signs a promissory note demonstrating the debt owed to the lender.
  • Borrower signs a deed of trust,
  • Third party serves as trustee and holds legal ownership during the pendency of the mortgage.
  • If the loan is not repaid, the lender will request that Trustee sign over title to the lender.
  • An “administrative foreclosure”.

For further written and video explanation, discussion and practice questions, see What is a "deed of trust" or "security deed"?

What is a “Land Sale Contract”
  • Owner of land sells and retains title until the buyer pays
  • Seller remains as the legal owner of the land.
  • Buyer acts as if she is the owner during the payment period.
  • Buyer defaults and forfeits her right to purchase the property.

For further written and video explanation, discussion and practice questions, see What is a "land sale contract"?

Security Interest in Personal Property
  • Using any form of personal property to secure a debt.
  • Article 9 of the Uniform Commercial Code.

For further written and video explanation, discussion and practice questions, see What is a security interest in personal property?

Establish a Security Interest in Personal Property
  • Security Agreement
  • Value Given
  • Ownership in Collateral

For further written and video explanation, discussion and practice questions, see How does one establish a security interest in personal property?

Perfecting a Security Interest
  • “Perfection” - notice that the secured party claims a security interest in the debtor’s collateral.
  • Security interest is enforceable as against third parties
  • Maintain “priority of payment”

For further written and video explanation, discussion and practice questions, see What is "perfection" of a security interest?

Perfecting a Security Interest in Personal Property
  • Financing Statement -
  • Possession or Control
  • Automatic Perfection

For further written and video explanation, discussion and practice questions, see What are the methods of perfecting a security interest in personal property?

Establish Security Interest in Real Estate
  • Publicly filing notice of the security in accordance with state recording statutes.
  • Registered in a government office where the land is located.
  • “recorder” or “register of deeds” office.

For further written and video explanation, discussion and practice questions, see How does one establish a security interest in real property (land)?

Automatic Perfection of a Security Interest
  • Perfected without filing a financing statement and without taking possession or control of the collateral.
  • Types:

⁃ Purchase Money Security Interests in Consumer Goods

⁃ Purchase Money Security Interests in Non-Consumer Goods

⁃ Perfection in Proceeds from the Sale of Goods

⁃ Assignments of Accounts Receivable and Contract Rights

For further written and video explanation, discussion and practice questions, see What is "automatic perfection" of a security interest?

Purchase Money Security Interest (PMSI)
  • Secured party provides the funds necessary to purchase the subject collateral.
  • Automatically perfected when the security agreement attaches to collateral that is consumer goods.
  • Consumer goods - for personal use by the purchaser rather than for business use or resale.
  • Purchaser of the consumer goods from the seller will take free in clear if all of the following conditions are met:

No Knowledge of Security Interest

Provide Value - The buyer must provide value for the goods;

Personal Use - Must primarily use the goods for personal, family, household purposes.

For further written and video explanation, discussion and practice questions, see What is a "purchase money security interest" (PMSI) in consumer goods?

Purchase Money Grace Period in Non-Consumer Goods
  • Sellers of non-consumer goods
  • Temporary automatic perfection of PMSI in the collateral sold.
  • 20-day grace period for filing a financing statement following attachment
  • Perfection dates back to the date the security interest attached to the collateral.

For further written and video explanation, discussion and practice questions, see What is a "purchase money grace period" for a PMSI in non-consumer goods?

Continued Perfection of PMSI in Non-Consumer Goods
  • File the appropriate financing statement within 20 days of the purchaser receiving the asset.
  • Extends to any proceeds from a later sale of the assets.

For further written and video explanation, discussion and practice questions, see How does one continue perfection of a PMSI in non-consumer goods?

Temporary Automatic Perfection in “Proceeds” from Sale of Goods
  • Security interest automatically extends to the proceeds from the sale of that collateral for 20 days.
  • Extending perfection past 20 days:

Financing Statement & Similar Type of Collateral

Identifiable Proceeds

File New Financing Statement

For further written and video explanation, discussion and practice questions, see What is "temporary automatic perfection" in "proceeds" from the sale of goods?

Security Interest in “Assignment of Accounts Receivable” and “Contract Rights”
  • Single Account to Satisfy a Debt
  • Automatic Perfection

For further written and video explanation, discussion and practice questions, see How is a security interest created in "assignment of accounts receivable" and "contract rights"?

Perfection of Security Interest by Possession of Collateral
  • Personal possession or possession by an agent.

For further written and video explanation, discussion and practice questions, see How does one perfect a security interest by "possession" of the collateral?

Perfection of a Security Interest by Control
  • Deposit accounts, investment properties, letter-of-credit rights, and electronic chattel paper.
  • Agreement naming the secured party to control over the account or as a named party owning the account.

For further written and video explanation, discussion and practice questions, see How does one perfect a security interest by "control" of collateral?

Perfection of a Security Interest by Filing a Financing Statement
  • Financing Statement

Debtor’s Name

Secured Party’s Name -

Identifies Collateral - A description of the collateral must be sufficient to identify the collateral or indicate that the financing statement covers “all assets” or “all personal property” of the debtor.

  • Standard Form
  • Filing Fee
  • Debtor’s Mailing Address
  • Entity Status and Information
  • Secured Party’s Address

For further written and video explanation, discussion and practice questions, see How does one perfect a security interest by "filing a financing statement"?

Authorization to File a Financing Statement
  • Filing requires authorization
  • After security agreement, authorization to file a financing statement is implied.
  • Before security agreement, debtor must authenticate the financing statement.

⁃ Signing a confirmation document.

For further written and video explanation, discussion and practice questions, see What authorization is required to file a financing statement?

Where to File a Financing Statement
  • State secretary of state’s office.
  • Local courthouse where the debtor is located.
  • Local public property records.

For further written and video explanation, discussion and practice questions, see Where is the appropriate office to file a financing statement?

What is “Priority” of a Security Interest
  • Party’s right to payment in the event of default by a debtor.
  • Secured party
  • Priority
  • Risk and Creditor Status

For further written and video explanation, discussion and practice questions, see What is "priority" of a security interest?

Perfection and Priority of a Security Interest
  • Perfect security interest to establish priority of her security interest
  • First party to perfect
  • Unperfected security interest is subordinate (lower priority) to a lien creditor and a trustee in the event of bankruptcy.

For further written and video explanation, discussion and practice questions, see What role does perfection play in establishing the "priority" of a secured party?

Conflicts over Priority of a Security Interest
  • Lien Creditors vs. Security Interest
  • Buyers of Collateral vs. Security Interest
  • Perfected vs Unperfected

For further written and video explanation, discussion and practice questions, see What are the common conflicts arising as to priority of a security interest?

Priority of Common Law or Statutory Liens
  • Possessory Liens
  • Non-Possessory Lien

For further written and video explanation, discussion and practice questions, see What is the priority of parties secured by "common law and statutory liens"?

Priority when Purchasing Collateral Subject to Security Interest
  • Subject to a security interest takes the property subject to that security interest.
  • Validly perfected security interests or if the buyer knows about the security interest at the time of purchase.
  • Except:

Authorization of Secured Party

Buyers in the Ordinary Course of Business

Consumers Purchasing Consumer Goods from Other Consumers

For further written and video explanation, discussion and practice questions, see What is the priority of a buyer of collateral that is subject to a security interest?

Buyer in the Ordinary Course
  • Good Faith
  • Not Aware of Violation of Rights
  • Ordinary Course of Business

For further written and video explanation, discussion and practice questions, see What is required to be a buyer in the ordinary course of business?

Section 9-320(b) Protections
  • Buyer-in-the-ordinary course takes free and clear.
  • Purchase from buyer in ordinary course may be subject to security interest.
  • UCC § 9-320(b) may remedy this harsh result:

Consumer Goods

No Knowledge of Security Interest

Provide Value for Goods

Personal Use

No Financing Statement

For further written and video explanation, discussion and practice questions, see How does 9-320(b) protects consumers purchasing goods from other consumers?

Shelter Principle
  • Good faith purchaser of property acquires all of the rights that the transferor of that property.
  • Broader than the buyer in the ordinary course and UCC 9-320 protections.
  • Protects consumer and non-consumers who purchase collateral from a consumer.

For further written and video explanation, discussion and practice questions, see What is the "Shelter Principle"?

Priority Rules for Security Interests
  • Perfect vs Unperfected Security Interests
  • Unperfected vs Unperfected Security Interests
  • Multiple Perfected Security Interests

For further written and video explanation, discussion and practice questions, see What are the general "priority rules" for security interests?

Priority in Proceeds from Sale of Collateral
  • Maintain priority in the proceeds from sale of that collateral.
  • Cash or Similar Property Proceeds
  • Non-Filing Collateral

For further written and video explanation, discussion and practice questions, see Who has "priority in proceeds" from the sale of collateral?

Priority in Future Advances of a Debtor
  • Time of Perfection
  • Priority over Lien Creditors
  • Priority over Buyers of Collateral

For further written and video explanation, discussion and practice questions, see What is a secured partys priority in future advances to a debtor?

Priority of PMSI in Goods
  • Priority over conflicting security interests
  • The security interest must be perfected within 20 days of debtor receiving possession of goods.
  • Priority in identifiable proceeds of the collateral if sold.

For further written and video explanation, discussion and practice questions, see What is the priority of a PMSI in goods (other than inventory and livestock)?

Priority of a PMSI in Inventory
  • Perfection at Time of Possession
  • Notice to Secured Parties
  • Description of PMSI Collateral

For further written and video explanation, discussion and practice questions, see What is the priority of a PMSI in inventory?

Priority of Conflicting PMSIs
  • Priority for the individual financing the purchase over individuals providing a financing loan.
  • First to file or perfect the security interest determines priority.

For further written and video explanation, discussion and practice questions, see What is the priority of conflicting PMSIs?

Priority of Security Interest in Fixtures
  • Fixture
  • Not readily moveable.
  • Fixture filing in the appropriate government office to establish the priority of her security interest in the fixture.
  • Failure to file, fixture is subordinate to a conflicting interest of the owner of real property

For further written and video explanation, discussion and practice questions, see What is the priority of security interests in fixtures?

Scope of Fixture Priority Rules

Purchase-Money Priority in Fixtures

  • Recorded Interest in Real Estate
  • PMSI in Fixture
  • Prior Ownership of Real Property
  • Prior Fixture Filing

For further written and video explanation, discussion and practice questions, see What is the scope of fixture priority rules?


Flashcard - Study Practice

Q1
A __________ is a form of property interest in real or personal property given by the owner of the property to provide assurance to a third party that the property owner will perform an obligation or pay a debt.

Q2
Generally, a borrower provides a security interest in property to give assurance that she will _________.

A2
repay the loaned funds.

Resource Video: https://thebusinessprofessor.com/security-interest-defined/

Q3
If the borrower fails to repay the loan, the lender may ____________.

A3
seek to take possession of and sell the property securing the loan.

Resource Video: https://thebusinessprofessor.com/security-interest-defined/

Q4
Taking a security interest in collateral to secure a debt reduces the risk to the creditor. True or False

Q5
A security interest in property entails the secured party’s right to ________ and ________ upon the collateral in the event of default.

A5

Q6
Foreclosure is the use of the property to satisfy the outstanding debt. There are two types of foreclosure:

A6
Strict Foreclosure; Foreclosure Sale

Resource Video: https://thebusinessprofessor.com/benefits-of-a-security-interest-in-collateral/

Q7
__________ is when a secured party repossesses and retains possession of the collateral in complete satisfaction of the outstanding debt.

Q8
A _________ is the process of selling the collateral in a private sale or at public auction.

Q9
A debtor generally has ___________, which is the right to repay the outstanding debt and reclaim the property at any time prior to the creditor foreclosing on the property.

Q10
The most common forms of security interest in land include:

A10
Mortgages, Deeds of Trust, Land Sales Contracts

A _______ is a loan that is secured by real property.

Q12
_________ is the process by which the mortgage holder takes control of the property securing a debt.

Q13
If the property, once repossessed, does not generate sufficient proceeds from sale to repay the outstanding loan, there is a ______.

Q14
The property owner may still be liable for additional funds if the sale of the property does not pay the debt. If so, the lender can bring a civil action asking for a ________ against the debtor.

Q15
A ________ affords a borrower a specific amount of time to repay the amount owed on the foreclosed property and regain possession.

Q16
The government (generally the local Sheriff’s office) is involved in the process of repossessing and selling the foreclosed property. State law governs the sale of the property, which must be ____________ in light of the circumstances.

Q17
If the secured party pursues strict foreclosure, she may keep the collateral in complete satisfaction of the debt; but, she cannot pursue a deficiency judgment against the debtor. True or False

Q18
A ___________ is a form of mortgage in which a borrower of money signs a promissory note demonstrating the debt owed to the lender. The borrower then takes possession of the land and records her ownership. The borrower signs a deed of trust, which transfers the land to the lender. The deed cannot be recorded except upon default.

A18
“deed of trust”, or “security deed”

Resource Video: https://thebusinessprofessor.com/deeds-of-trust-and-security-deeds/

Q19
What is the difference between a deed of trust and a standard mortgage with regard to how the security interest is recorded.

A19
A traditional mortgage simply records the security interest in the public records (registrar of deeds office) where the property is located. The deed of trust takes a different tact. A third party serves as trustee and holds the deed transferring legal ownership of the land during the pendency of the mortgage.

Resource Video: https://thebusinessprofessor.com/deeds-of-trust-and-security-deeds/

Q20
The process of foreclosing on a deed of trust is commonly referred to as a(n) ____________.

A20
“administrative foreclosure”.

Resource Video: https://thebusinessprofessor.com/deeds-of-trust-and-security-deeds/

Q21
A ____________ is a situation where the owner of land sells it subject to the condition that the seller retain title to the land until the buyer pays the full purchase price.

Q22
In a land-sale contract, the buyer has the legal right to _______ and is responsible for __________.

A22
possess and use the land; paying taxes and insurance

Resource Video: https://thebusinessprofessor.com/land-sale-contracts-explained/

Q23
A security interest in personal property involves using any form of ________ to secure a debt.

A23
personal property or fixture

Resource Video: https://thebusinessprofessor.com/secured-transactions-defined/

Q24
Personal property that may serve as collateral includes ___________.

A24
tangible and intangible assets, commercial paper, and commercial (floating) liens.

Resource Video: https://thebusinessprofessor.com/secured-transactions-defined/

Q25
A security interest in property begins when personal property is identified as collateral for a loan. This is known as _________.

A25
“attachment” or “attaching” the property.

Resource Document: https://thebusinessprofessor.com/attachment-of-a-security-interest/

Q26
Attachment takes place when the following conditions are met:

A26
Parties enter into a written security agreement; secured party gives or transfers value to the debtor; debtor acquires ownership of the collateral.

Resource Document: https://thebusinessprofessor.com/attachment-of-a-security-interest/

Q27
A security agreement may include a(n) __________ clause, meaning that property acquired by the debtor after the loan is made can serve as collateral for the original loan.

A27
“after-acquired collateral”

Resource Document: https://thebusinessprofessor.com/attachment-of-a-security-interest/

Q28
_________ is the process of putting the entire world on notice that the secured party claims a security interest in the debtor’s collateral.

Q29
A security interest is only enforceable as against third parties (seeking to also take a security interest in the collateral) once it is perfected. True or False

A29
True - It is effective against the debtor when it attaches. It is effective against 3rd parties when it is perfected.

Resource Video: https://thebusinessprofessor.com/perfection-of-a-security-interest/

Q30
Perfection allows the secured party to maintain __________ above other creditors in the event the collateral must be repossessed and sold to pay outstanding debts.

A30
“priority of payment” or “priority”

Resource Video: https://thebusinessprofessor.com/perfection-of-a-security-interest/

Q31
Generally, Article 9 allows a secured party to perfect her security interest through the following methods:

A31
Filing a financing statement; Possession or Control of the Collateral; Automatic perfection

Resource Video: https://thebusinessprofessor.com/methods-of-perfecting-a-security-interest-in-personal-property/

Q32
The most common way of perfecting a security interest under Article 9 is to __________.

A32
file a financing statement in the appropriate public office

Resource Video: https://thebusinessprofessor.com/methods-of-perfecting-a-security-interest-in-personal-property/

Q33
Rather than filing a financing statement, a secured party may perfect a security interest by establishing _________.

Q34
Some security interests are automatically perfected, either permanently or temporarily, upon attachment of the security interest to the collateral. True or False

Q35
Secured parties must perfect a security interests in land by __________.

A35
publicly filing notice of the security in accordance with state recording statutes.

Resource Video: https://thebusinessprofessor.com/establishing-a-security-interest-in-real-property-land/

Q36
Generally, mortgages and deeds of trust must be publicly registered in a government office where the land is located. This office is typically known as ___________.

A36
the “recorder” or “register of deeds” office.

Resource Video: https://thebusinessprofessor.com/establishing-a-security-interest-in-real-property-land/

Q37
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 __________.

Q38
______ allows a party a window of time to undertake procedures to permanently perfect the security interest.

Q39
The following are the most common types of automatically perfected security interest:

A39
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.

Resource Video: https://thebusinessprofessor.com/automatic-perfection-of-a-security-interest-in-goods/

Q40
__________ arises in situations where the secured party provides the funds necessary to purchase the subject collateral.

A40
A purchase money security interest (PMSI)

Resource Video: https://thebusinessprofessor.com/purchase-money-security-interest-in-consumer-goods/

Q41
A PMSI is automatically perfected when the security agreement attaches to collateral that is _________.

Q42
The purchaser of the consumer goods from the seller will take free in clear if all of the following conditions are met:

A42
The buyer cannot know about the security interest in the collateral; The buyer must provide value for the goods; Must primarily use the goods for personal, family, household purposes.

Resource Video: https://thebusinessprofessor.com/purchase-money-security-interest-in-consumer-goods/

Q43
Sellers of ________ receive temporary automatic perfection of an attached PMSI in the collateral sold.

Q44
The seller of non-consumer goods has a _________ for filing a financing statement following the attachment of the purchase money security interest in the collateral.

A44
20-day grace period - If the secured party fails to file a financing statement during the 20-day grace period, the temporary automatic perfection is lost.

Resource Video: https://thebusinessprofessor.com/purchase-money-grace-period-for-secured-parties/

Q45
If the secured party files the financing statement against the non-consumer goods during the 20-day period, her security interest is perfected and has priority from ________.

Q46
A perfected security interest in non-consumer goods also extends to any __________.

A46

Q47
A perfected security interest in collateral automatically extends to the proceeds from the sale of that collateral (with certain exceptions) for ________ following the sale.

Q48
Any of the following scenarios will extend the period of temporary perfection in proceeds from the sale of collateral past the 20-day period:

A48
Before sale, filing a financing statement and the proceeds are the same type of collateral; the proceeds are identifiable; perfecting a new security interest within 20 days of the sale.

Resource Video: https://thebusinessprofessor.com/temporary-automatic-perfection-in-proceeds-from-sale-of-goods/

Q49
Generally, the sale or assignment of rights in accounts, payment intangibles, or promissory notes (account) creates a security interest for ______________.

Q50
An individual must file a financing statement to perfect a security interest in an account. True or False

A50
True. While a security interest attaches to an account upon assignment, as financing statement is required to perfect the security interest.

Resource Video: https://thebusinessprofessor.com/security-interest-in-assignment-of-accounts-receivable-or-contract-rights/

Q51
There are, two exceptions that allow the assignee of the account to perfect a security interest without publicly filing a financing statement.

A51
The assignment of a single account in satisfaction of a preexisting debt; The assignor transfers a limited number of accounts to the assignee that does not constitute a significant number of the assignor’s accounts.

Resource Video: https://thebusinessprofessor.com/security-interest-in-assignment-of-accounts-receivable-or-contract-rights/

Q52
Article 9 allows a secured party to perfect a security interest in goods, instruments, negotiable documents or tangible chattel paper by ________.

A52
securing possession of the collateral.

Resource Video: https://thebusinessprofessor.com/perfection-of-a-security-interest-by-possession/

Q53
Article 9 allows for perfection of a deposit accounts, investment properties, letter-of-credit rights, and electronic chattel paper in certain types of collateral by __________.

Q54
To be enforceable under the UCC, a financing statement must contain the following information:

A54
Debtor’s Name; Secured Party’s Name; Identifies Collateral.

Resource Video: https://thebusinessprofessor.com/perfection-of-security-interest-by-filing-financing-statement/

Q55
A secured party must be authorized to file a financing statement against the assets of the debtor, such as being bound by a security agreement. If the debtor is not bound (or not yet bound) by the security agreement, the debtor must __________.

A55
authenticate the financing statement. This is normally done by signing a confirmation document.

Resource Video: https://thebusinessprofessor.com/authorization-required-to-file-financing-statement/

Q56
Financing statements covering goods are generally filed or processed through ___________.

A56
the state secretary of state’s office or at the local courthouse where the debtor is located.

Resource Video: https://thebusinessprofessor.com/appropriate-office-to-file-a-financing-statement/

Q57
The _________ of a secured party regards the party’s right to payment in the event of default by a debtor.

Q58
A Subordinate secured creditors will only receive payment once the highest priority secured creditor is paid in full. True of False

Q59
If a secured creditor’s claim is not paid in full (because the value of collateral does not cover the full debt), she becomes an _______.

A59
unsecured creditor of the debtor.

Resource Video: https://thebusinessprofessor.com/what-is-priority-of-a-security-interest/

Q60
In the event of debtor bankruptcy, Secured creditors must either ____________.

A60
be paid in full or they can force the sale or surrender of the collateral securing the obligation.

Resource Video: https://thebusinessprofessor.com/what-is-priority-of-a-security-interest/

Q61
A secured creditor must _________ to establish the priority of her security interest with relation to all other creditors.

Q62
The first secure party to perfect a security interest in the collateral generally gives her priority above any other creditors who later attempt to establish a security interest in the collateral. True or False

Q63
A lien creditor who establishes an interest in a debtor’s property prior to perfection by another secured party has priority over that secured party. True of False

A63
True - This is true for “possessory liens” but not “non-possessory liens”.

Resource Video: https://thebusinessprofessor.com/priority-regarding-conflicts-in-security-interests/

Q64
Generally, buyers who take possession of the collateral in many situation take the collateral subject to a perfected security interest. Two notable exceptions arise when

A64
1) the collateral is a consumer good for personal use being sold to another consumer for personal use, and 2) when the collateral is inventory for the debtor.

Resource Video: https://thebusinessprofessor.com/priority-regarding-conflicts-in-security-interests/

Q65
A perfected security interest in collateral has priority over an unperfected security interest in the same collateral, unless the unperfected security interest was created before the perfected security interest. True or False

A65
False - The perfected security interest has priority, regardless of the timing of attachment of the security interest.

Resource Video: https://thebusinessprofessor.com/priority-regarding-conflicts-in-security-interests/

Q66
A ___________ is a common law or statutory interest in an asset that secures a payment for services or material furnished in the ordinary course of business; is create pursuant to statute or common law; and the asset is under the control of the lien holder.

Q67
A non-possessory lien generally arises through ____________.

Q68
As a general rule, if a debtor sells collateral that is subject to a security interest, the security interest continues in the collateral following the sale to the buyer. True or False

A68

Q69
What are the exceptions to the rule that the purchaser of collateral subject to a security interest takes the collateral subject to that security interest (I.e., the security interest remains attached to the collateral)?

A69
The security party authorized the sale; the purchase is in the ordinary course of business (such as buying inventory from a merchant); the collateral is a consumer good purchased from another consumer.

Resource Video: https://thebusinessprofessor.com/priority-of-a-secured-party-vs-a-buyer-of-collateral/

Q70
A secured party’s failure to object to the sale of the collateral in which she holds a security interest may constitute authorization, and detach her security interest from the collateral. True or False

Q71
A purchaser of consumer goods from another consumer may take the goods free of an existing security interest. Two provisions protect consumers in this situation, are:

A71
UCC § 9-320(b) and the “Shelter Principle”.

Resource Video: https://thebusinessprofessor.com/priority-of-a-secured-party-vs-a-buyer-of-collateral/

Q72
A buyer in the ordinary course of business must meet the following characteristics:

A72
must buy it in good faith and without the intent to defraud or deceive; cannot know that the sale of the collateral violates the security interest of a third party; must purchase the goods under normal purchasing conditions from a seller of goods of that kind.

Resource Video: https://thebusinessprofessor.com/protections-of-a-buyer-in-the-ordinary-course-of-business/

Q73
The buyer-in-ordinary course exception does not protect anyone who later purchases the collateral from the BOCB. True or False

Q74
Under § 9-320(b) the buyer takes the collateral free of the security interest under the following conditions:

A74
The goods are consumer goods in the hands of the seller; The buyer buys without knowledge of the security interest; buys the collateral for value (generally cash); buys the collateral for his own personal, family, or household purposes; and the holder of the security interest has not filed a financing statement covering the goods prior to the purchase.

Resource Video: https://thebusinessprofessor.com/security-interests-in-goods-purchase-from-one-consumer-by-another/

Q75
__________ Is an equitable principle states that a good faith purchaser of property acquires all of the rights that the transferor of that property.

A75
“Shelter Principle” - Section 2-403(1)

Resource Video: https://thebusinessprofessor.com/the-shelter-principle-and-buyers-of-collateral/

Q76
The “Shelter Principle” (Section 2-403(1)) protects consumer and non-consumers who purchase collateral from ____________.

A76
a buyer in the ordinary course, including where the secured party has filed a security interest covering the collateral, which is outside of the scope of 9-320.

Resource Video: https://thebusinessprofessor.com/the-shelter-principle-and-buyers-of-collateral/

Q77
A perfected security interest has priority over an unperfected security interest. This is true even if the unperfected security interest was established well before the perfected security interest. True or False

Q78
Unperfected security interests have priority based upon __________.

A78
the order of attachment of the security interest.

Resource Video: https://thebusinessprofessor.com/priority-rules-for-conflicting-security-interests/

Q79
If a party takes the steps necessary to continue the temporary automatic perfection, her perfection date is ________.

A79
retroactive back to the date and time that the security interest attached.

Resource Video: https://thebusinessprofessor.com/priority-rules-for-conflicting-security-interests/

Q80
A party can agree to subordinate her security interest to the security interests of others. True or False

Q81
A secured party with priority in collateral will also maintain priority in the proceeds from sale of that collateral. In this case, the date of perfection of the security interest in the proceeds is ___________.

A81
the same as the perfection date for a security interest in the collateral.

Resource Video: https://thebusinessprofessor.com/special-priority-rules-for-proceeds-from-sale-of-collateral/

Q82
A secured party has priority over a conflicting security interest in proceeds if she has perfected her security interest and the proceeds of sale are ___________.

A82

Q83
Priority of security interests in the proceeds from the sale of non-filing collateral (perfected by possession or control) ranks according to _______.

A83
the time of filing of a security interest in that collateral (or proceeds). So, first to file rules come in.

Resource Video: https://thebusinessprofessor.com/special-priority-rules-for-proceeds-from-sale-of-collateral/

Q84
The time of perfection of a security interest establishes priority with respect to future advances (funds lent as part of an on-going loan agreement). True or False

A84
True. Generally, the security clause in the lending agreement allows for priority of future advances.

Resource Video: https://thebusinessprofessor.com/secured-party-priority-in-future-advances-to-debtor/

Q85
A secured party that advances additional funds and claims a security interest against the original collateral has priority over a lien creditors of the debtor if:

A85
The secured party made the advance of new credit within 45 days after the lien attaches; or, The secured party made the advance of funds more than 45 days after the lien attaches, but without knowledge of the lien or pursuant to a prior agreement entered into without knowledge of the lien.

Resource Video: https://thebusinessprofessor.com/secured-party-priority-in-future-advances-to-debtor/

Q86
A secured party who makes future advances against collateral has priority over a buyer of the collateral in the ordinary course if:

A86
The secured party’s advance is made within 45 days and without knowledge of the purchase; or The advance was made pursuant to a commitment established within 45 days of and without knowledge of the purchase.

Resource Video: https://thebusinessprofessor.com/secured-party-priority-in-future-advances-to-debtor/

Q87
A perfected purchase-money security interest in goods (other than inventory or livestock) has priority over conflicting security interests if the security interest is perfected within ___________.

A87
20 days of the debtor receiving possession of the goods.

Resource Video: https://thebusinessprofessor.com/priority-of-purchase-money-security-interest-in-collateral/

Q88
In order to qualify for PMSI priority in inventory, the secured transaction must meet the following requirements:

A88
The PMSI must have been perfected at the time the debtor takes possession of the inventory. The secured party must provide authenticated notification to any holders of conflicting security interests in the debtor’s collateral prior to perfection. The notification to other secured parties must state that the creditor intends to take a PMSI in the debtor’s inventory and it must describe the inventory.

Resource Video: https://thebusinessprofessor.com/purchase-money-security-interest-in-inventory/

Q89
Often a debtor will acquire property subject to multiple purchase-money security interests. If all of the financiers or enabling lenders are the same, the UCC provides that _________ determines priority.

A89
the first to file or perfect the security interest

Resource Video: https://thebusinessprofessor.com/priority-of-purchase-money-security-interest/

Q90
Under the UCC, a secured party with a security interest in a personal good that will become a fixture must _______________ to establish the priority of her security interest in the fixture.

A90
make a fixture filing in the appropriate government office

Resource Video: https://thebusinessprofessor.com/priority-of-security-interest-in-fixtures/

Q91 section_content_181=

Q92
For holders of a security interest in a fixture to establish priority over conflicting security interests in the real estate, the following conditions must be met:

A92
The debtor has a record interest in or possession of the real estate; The secured party holds a purchase-money security interest in the fixture; The interest of the mortgage holder of the real property arose before the goods became fixtures; and The security interest is perfected by a fixture filing before the goods became fixtures or within 20 days thereafter.

Resource Video: https://thebusinessprofessor.com/priority-of-fixture-filer-vs-mortgage-holder/

Q93
If a third-party perfects a security interest in the real estate after the fixture is installed but before the PMSI secured party can make a fixture filing, the third-party has priority in the fixture. True or False


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