Continuation Statement Definition
A continuation statement refers to modification or alteration made to a UCC-1 financing statement which makes it effective beyond its normal expiration date. The effect of a continuation statement is that a lien placed by a lender on the collateral of a borrower is extended beyond the original expiration date of the UCC-1 financing statement.
A continuation statement when filed by a lender allows the extension of a financing statement five years after its filing date. As stipulated in section 9 of UCC, the continuation statement must be filed six months before the UCC-1 expires. Lenders are also required to file continuation statements with appropriate authorities.
A Little More on What is a Continuation Statement
Continuation statements are filed by lenders to extend the original expiration of a UCC-1 financing statement for another five years. These statements must be turned in to the appropriate jurisdiction six months before the UCC-1 expires. Lenders who do not file at this time are denied any extension or amendment to the expiration date of the financing statement.
As required by the Uniform Commercial Code (UCC), the initial UCC-1 which a continuation statement amends must be identified at the point of filing. Continuation statements are otherwise called UCC-3 continuation statements.
Why File a Continuation Statement
When borrowers are yet to settle their debt obligation and the expiration time in a financial statement is closing up, lenders file continuation statements to help them extend the time needed for debt collection. Continuation statements give lenders a good position to collect debt even when a borrower is going to default due to inability to make payments or financial hardships.
Also, when there are multiple creditors aiming to collect debt from a borrower, a creditor can file continuation statement to have priority over other creditors. Failure to file a continuation statement exactly six months before the original expiration date of a UCC-1 financing statement, a creditor has missed the opportunity for extended date.