secured transactions

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Anonymous
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147203
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secured transactions
Updated:
2012-04-12 04:50:56
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secured cooley
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secured super
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  1. What were the pre code security devices?
    • Pledge:physical control
    • Chattel mortgage: same as property mortgage
    • Conditional sale: Title is retained until payent in full
    • Field warehouse: Items secured, debtor can't access them.
    • Promissory note: note of agreement to pay
    • Security interest: attachment of collateral.
  2. What are the requirements for attachment in security agreements?
    signed security agreement by debtor, creditor must provide value, debtor must have rights in the collateral.
  3. What is filing?
    The filing of a 1 page filing statement in the state the debtor is located.
  4. What is the scope of article 9?
    Transaction, regardless of form, that creates a security interest in personal property or fixtures by contracct, an agricultural lien, a sale of accounts, chattel paper, payement intangibles or promisory notes, a conditional sale, a shipment under reservation, or a sale of accounts receivable.
  5. What are the three methods of perfection??
    Possession, control, filing
  6. What are the rules for consignment?
    Goods are subject to claims of creditors unless they are true consignments. That is, the seller is known to sell goods on consignment, or the deliverer of the goods comples with filing provisions.
  7. What are the catergories of collateral?
    • Consumer goods, Equipment, Farm products, Inventory (the tangibles)
    • Quasi tangibles- Instruments, Investment property, Documents, Chattel paper, letters of credit rights,
    • Intangible property: Accounts, deposit accounts.
  8. What must be in a security agreement?
    the terms of the agreement between the parties, must be authenticated adequately describe the collateral "must be as specific as UCC terms."
  9. How can each thing be perfected?
    • Possession only: Money
    • Filing or Possession: Goods, instruments, Taingible chattel paper, negotiable documents
    • Filing only: accounts, general intangibles, commercial tort claims, non-negotiatble documents.
    • Filing or control: Investment property, electronic chattel paper
    • Control only: Deposit accounts, letter of credit rights
  10. Are mortgage backed securites allowed?
    • Yes, attachment of a security interest in a right of payment is secured by a SI in something else (like a mortgage) is attachment of that SI as well.
    • 9-203(g), 9-308(e)
  11. What's the after acquired property rule for consumer goods?
    9-204, you have 10 days from the giving of value to attach SI in consu,mer goods.
  12. What makes a financing statmenet effective?
    9-502(a) Secured parties name, description of collateral, debtor's legal name
  13. What is the test for errors in a name in a financing statement?
    Name must be within one page of the persons real name in using the state's standard search logic.
  14. How long do you have to change financing statement if debtor's name changes?
    4 months for after acquired collateral, original collateral still fine.
  15. who bears the risk of clerical error in filing of financing statements?
    As long as the requirements of 9-502 are met, the secured party are protected.
  16. How long is a financing statement good for?
    5 years (9-515) after 5 years, have 6 months to file a continuation. If it lapses after this, then all perfection goes away. Must then refile to restore your position.
  17. Whats the rule regarding termination statements?
    9-625: 20 days after debtor request for everything but consumer goods. 30 days after debt paid off (no request required) for consumer goods.
  18. What is the field warehouse rule?
    Possession of the receipt is possession of the chattel, unless the person is so closely connected to the wearehouse that the debtor still has effective possession. 9-312
  19. What is a PMSI? In what kind of transactions does it automatically attach?
    A PMSI is a purchase money security inetest. It means that you gave them the money to purchase something, and they used that money to purchase it, and you have a security interest in that good they purchased until they pay you back It automatically attaches in consumer goods, but no other goods.
  20. What are the four kinds of automatic perfection?
    Assignment of account that is not a significant portion of overall accounts, sale of a promissory note, supporting obligations, PMSI in consumer goods.
  21. PSP vs. PSP? USP vs USP? PSP vs. judicial lien?
    • First to file.
    • First to attach
    • PSP if perfection first, JLC if attached before perfection.
  22. What are the rules regarding where to file?
    9-301: General rule is to file in debtor's location. With intangible goods, law remains the same regardless of where the debtor moves, with tangibles, if the debtor moves the collateral to a different state, the law changes to the laws of that state and you have 4 months to refile.
  23. What is the rule of second states issuing certificates of title without notations of SI?
    • Lien creditor: Will take subject to perfected SI
    • Purchaser for value: if fail to refile for 4 months after new COT, unperfected against purchaser for value.
    • Buyer of goods who receives without knowledge who doesn't sell these goods, takes free of SI
    • New SI that is perfected without knowledge of old SI? Old interest is subordinate.

    9-316, 317, 337
  24. What is call ahead seating in PSP?
    If you have debtor's permission, you can file early and save your place in line ahead of people who file after, even though you aren't perfected yourself yet. Even someone who perfects before you do is not protected from your SI.
  25. Explain after acquired property and future advances
    AAP: Loan applies to collateral that you receive in the future.

    FAC: Collateral existing today secures loans today and in the future.If no termination statement is filed, another loan on the same property is still perfected. 9-204
  26. What is a dragnet clause? what are the two tests for it?
    • Extends collateral to all loans with an entity. E.g. car becomes collateral for credit card.
    • Prior indebtedness test: loans must be specifically referenced.
    • Future indebtedness test: Must be in plain meaning of the contract, in the same class, or so close that cross colateralization is inferred.(depends on court)
  27. What is PMSI super priority? how long do you have to perfect to get it?
    • PMSIs beat other perfected creditors even if not first in time. You have 20 days from debtor possession to file in order to have the super priority , relates back to date of attachment.
    • 9-309, 317, 324
  28. What is the special rule for inventory PMSIs?
    No 20 day grace period for super priority. Must be perfected before inventory arrives to have super priority. Must give notice to other creditors received before delivery of inventory that describes the inventory you have a PMSI in. 9-324
  29. PMSI vs. PMSI, both w/ super priority
    Seller or vendor gets priority.
  30. What is the general rule for buyers in the ordinary course? What is the special exception?
    Buyers in ordinary course take free of SI. Exception: Does not apply to farm products.
  31. What's the rule for article 2 claimants vs. article 9 claimants?
    An article 2 claimant will win even without a security agreement or financing statement.
  32. What is the rule for statutory lien holders?
    Possessory liens have priority over SI in goods, even perfected. Once original possession is interrupted, though, the artisian loses priority.
  33. What is a true consignment?
    A consignment where the seller has no title in the property, and must give it back after a certain peroid of time. Article 9 is not concerned with true consignments.
  34. What is a disguised scale?
    Buyer keeps goods if not sold, buyer controls price, bears risk of loss.
  35. What consignments are not article 9's concern?
    Those less than 1000 dollars, those done by auction, consumer to consumer transactions, obvious consignments.
  36. What must you do if article 9 is concerned with your consignment?
    File a financing statement.
  37. What's the difference between assession and comingling?
    Assession is something that can be easily removed from the whole a box of ball bearings, comininging is something that is mixed and cannot be unmixed (a ball bearing installed in a car. )
  38. What are the rules for accession and cominingling?
    The rule for assession is first to file or perfect in that particular item, the rule for comingling is that the identity of the good is lost and the security interest becomes the manufactured good.
  39. What is the fixture analysis?
    Is the good a fixture? (3 prong test) physically annexed, adapted to use to which real estate is put, annexed with intent to make part of realty. Has a valid fixture filing been made? Where the Mortgage is recorded. Who is the competing interest for the fixture and who has priority? race rule, mortgage vs. secured creditor. 9-334 Who pays the expense of removing the fixture? SC who has priority, must pay for physical injury to property.
  40. What is the rule with proceeds?
    When an item is sold in the ordinary course of business, the buyer generally attaches in the proceeds of the sale. The proceeds are whatever is received in exchange for collateral. SI's automatically attach to any proceed. 9-315.
  41. How are proceeds perfected?
    If perfected in the original collateral, you have 20 days to reperfect. Only exceptions are identifiable cash proceeds, inventory for promisory notes, or inventory for inventory.
  42. What is the lowest intermediate balance rule?
    The last money spent in a deposit account are identifiable cash proceeds. Non proceeds in a later deposit do not add to cash proceeds, however.
  43. What must a SP do with collateral in their possession
    Take reasonable care to physically preserve it. 9-207, must comply with request for accounting of collateral in 14 days. 9-210.
  44. What are the rights of the debtor in default?
    Debtors can get damamges for any violation of their rights to have the SP maximimize the value of the collateral they've taken, either so they don't have a defecit or so they get a surplus.
  45. What are teh rights of the secured party after default?
    Repossess without notice as long as no breach of peace 9-609 or get judgement of default and use state foreclosure law 9-601.
  46. What's the rule for time is of the essense clauses in default?
    Allowed, but if the creditor accepts late payments a few times without exercising the clause, can't later exercise it without reinstateting the waived provision.
  47. What is an insecurity clause?
    A clause that say that if a debtor feels insecure in his debt, he can put the debtor in default. must be a good faith belief, honest in fact and observing reasoanble commercial standards. Debtor has burden of proving lack of good faith.
  48. What is strict foreclosure?
    When a creditor takes an item and keeps it in exchange for discharge of the debt, no sale. Debtor has 20 days to object. In consumer transactions, must have paid less than 60 % of price to strict foreclose. You can waive strict foreclosure after default.
  49. What is right of redemption?
    A right that many states give debtors to pay off the amount they owe in and reclaim their collateral. Cut off by strict foreclosure, disposition, or collection and enforcement.
  50. What is the rule for disposition?
    Sales must be done in a commercially reasonable manner, including giving reasonable notice, including time and place of public sale or peroid of redemption in private sale.. 9-625, 611, 613, 614
  51. Where is the burden in proving commercial unreasonableness in a disposition?
    Burden is on SP to prove reasonableness, if can't prove it, then there's a rebuttable presumption that there would have been no deficiency if the sale had been reasonable. (in some states, in consumer transactions, it's not rebuttable)
  52. Can a junior creditor repossess?
    Yes, do not have to give money to senior creditor, however, senior creditor can then repossess from junior creditor. Must also give senior notice and right to bid on goods.
  53. What is the rule for purchasing a foreclosed item?
    You take free only of the security interest upon which it was foreclosed. All other SI's on it are still in effect. Auctions are not buyers in ordinary course.
  54. What is the order of priority in securites entitlements?
    • Securities intermediary,
    • Priority in time between becoming entitlement holder, obtaining a control agrement, and control through another person
    • Perfection by filing.
  55. What is the order of priority in a deposit account?
    • Being a customer of the bank
    • Holding the account
    • control through agreement according to priority in time.
    • No filing allowed.
  56. What is a letter of credit?
    A letter issued from a bank to a beneficiary guaranteeing payment. Can only assign with the consent of the bank.
  57. What is a strong arm clause?
    in bankruptcy, a clause that allows the creditor to strong arm all unsecured creditors down to the same level, and divide the money equally. 9-544
  58. What are the requiments for a preference?
    Transfer of debtors property, to creditor or claimant, on account of a prior debt, insolvency (presumed within 90 days), transfer was within 90 days of date of bankrputcy, more than creditor would get under normal bankruptcy distribution. 9-547.
  59. What is the time rule for preferences?
    If security interest is obtained on teh same date as debt, no preference. There's also a substnatially contemperanous rule that says within a peroid of time whre they seem substantially contempareous (a weekend or so) they are not a preference.
  60. What is the ordinary course rule in bankruptcy?
    payemnts in the ordinary course are not preferences.
  61. What is the new value rule in bankrputcys?
    If you provide new value after a preferntial transfer that isn't secured, the creditor can decrease their preference liability by that amount.
  62. What is the rule for bankrputcy in floating liens?
    We take two snapshots, one 90 days out, one at bankruptcy, if there's an increase in value of inventory, that's a preference.
  63. What is the PMSI rule in bankruptcy?
    if you perfect within 30 days, PMSIs are not preferences
  64. When does the transfer occur in the bankrputcy context?
    If perfection is before 30 days after security agreement, then day of security agreement, if after 30 days, then date of perfection.

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