When does a security interest attach or become legally-enforceable?
Secured interest must be supported by consideration given.
The debtor must actually own the rights to the collateral or have possession.
Secured interest must be recorded.
See more @ another71.com/flashcards
What are the characteristics of perfection of an interest in a secured transaction?
It gets higher priority over others claiming rights to collateral after the perfection takes place.
Attachment must take place BEFORE perfection.
How does perfection occur in a secured transaction?
Perfection occurs in a secured transaction by:
- filing a financing statement
- possessing the collateral
When does automatic perfection occur in a secured transaction?
Automatic perfection occurs in a secured transaction when:
- A store sells a consumer good on credit - Store retains security interest.
- A bank finances the purchase of a consumer good - Bank retains security interest.
What are the priority rules for payment in a secured transaction?
If two parties are perfected, then the first one to file wins.
If neither party is perfected, then the first one to attach wins.
What are the advantages of a creditor holding a lien in a secured transaction?
A creditor holding a lien in a secured transaction:
- Holds priority over claims to collateral vs. unperfected security interests.
- Beats perfected security interests filed after lien attachment.
Exceptions: Purchase money security interest, which has a 20 day grace period to be filed.
Buyers purchasing in the ordinary course of business are immune from security interests held by merchants.
