Secured Transactions

Financing Statement Elements- (required for perfecting a security

interest)
• Names of debtor and secured party
• Signature of debtor
• Address of secured party where info may be obtained
• Mailing address of debtor
• Description of the collateral
Attachment Elements (all are required)
1. Value given by secured party
2. Debtor attains rights in the collateral
3. Agreement in writing, unless creditor has possession of the
collateral.

• Note: Debtor must have rights, but need not have title to
collateral
Perfection Methods
1. Filing a financing statement
a. Required method for pure intangibles, A/R
b. Duration = 5 years (must be renewed w/in 6 months of
expiration)
c. Termination Statement = debtor may request this of
creditor once debt is paid
d. Location = Determined by debtor’s location
e. Elements
i. Debtor’s name and address
ii.Creditor’s name and address
iii.Collateral Description (sufficient to identify the
goods)
iv.Debtor’s signature
2. Possession of collateral by creditor
a. Required method for cash, negotiable instruments, and
nonnegotiable docs of title
i. NOTE: Negotiable docs of title can be perfected via
possession or filing.
b. Filing not required
3. Automatic Perfection by law
a. To Give Creditor Time to Gain Possession—Temporarily for
20 Days (applies to instruments & negotiable docs of title)
b. For Release of Possession—Temporarily for 20 Days
c. Because Collateral Is Proceeds of Perfected Collateral—
Temporarily for 20 Days
d. PMSI- Consumer Goods- Permanent
i. Possession or filing NOT required, automatic
perfection occurs upon attachment
ii.Does not apply to collateral controlled by a title
statute (e.g., motor vehicle registration).
Secured Transactions
iii.If the consumer good is to become a fixture, the
secured party must file to perfect her/his interest
over collateral after it becomes affixed to real
property
iv.Not good against a subsequent bona fide purchaser
who buys the goods from the original consumer,
unless the purchase money secured party has filed a
financing statement covering the goods
e. Random, Isolated, Casual Assignment of Account(s)
Receivable—Permanently (exception to requirement for
filing financing statement)
4. Field Warehousing (collateral on debtor’s premises w/ bonded
warehouseman)
5. Consignment for sale of goods

• Moving collateral to new jurisdiction -> Original creditor has 4

months to re-file in new county
Priority Among Parties
• Buyer in ordinary course of debtor’s business (BOC)- will prevail
against perfected and unperfected creditors UNLESS:
• Farm Products
• BOC knows goods should not be sold at all (bad faith)
• Unperfected creditors & non-BOC
• BOC prevails if: 1)Gives value, 2)Takes Delivery, 3)No knowledge
of security interest
• Perfected creditors & non-BOC
• Creditor prevails unless exception occurs…
 Failing to file financing statement for items
automatically perfected
 HDC obtains collateral
• Chattel Paper = Promissory note + Security Agreement
• Multiple Article 9 Creditors (competing for same collateral)
• Both unperfected = First to attach wins
• Both perfected = First to file financing statement wins
 If perfected by other method, whoever perfected first
wins
• Lien Creditors: interest in collateral by statute or judicial process
• VS Article 9 Creditor: First in time (aka ‘perfect’) generally wins
• Artisan’s Lien: Defeats Article 9 creditors (must have possession
of collateral!)
• Commercially Reasonable Manner (Sale of collateral)
• Usual manner @ current price
• May deduct expenses necessary to dispose of collateral
• Time Limit on Disposition of Collateral
• If Debtor pays >60%, in case of interest in consumer goods
(PMSI), secured party must sell the collateral w/in 90 days
Secured Transactions
• Retention of Collateral- allowed, but must send notice to other
secured parties. If no objections in 20 days = OK
 Notice not required for consumer goods

• Disposition Order
1. Expenses related to disposal
2. Debt owed to secured party
3. Debt owed to any other junior security holders