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Secured Transactions

Secured Transactions. UCC Title 9. Security Interest. An interest in personal property or fixtures that secures payment or performance of a obligation. Possessory – Secured party takes possession of collateral. Nonpossessory – Use Security Agreement. Security Agreement.

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Secured Transactions

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  1. Secured Transactions UCC Title 9

  2. Security Interest • An interest in personal property or fixtures that secures payment or performance of a obligation. • Possessory – Secured party takes possession of collateral. • Nonpossessory – Use Security Agreement.

  3. Security Agreement • The agreement of the debtor and creditor that the creditor shall have a security interest in designated collateral. • In writing • Signed by debtor • Describe the collateral in reasonable detail

  4. Types of Secured Transactions Secured Credit Sale : Sales transaction in which creditor is seller and takes a purchase money security interest in item sold. Secured Loan Transaction : No sale involved. Creditor lends money and takes a security interest in property owned by borrower/debtor

  5. Types of Collateral Goods: Consumer Goods / Inventory / Equipment Negotiable Instruments: Commercial paper / Investment securities / Documents of Title Intangibles: Accounts receivable / Contract rights

  6. Attachment • Point at which the security interest becomes effective between debtor and creditor. Require: a. Secured party has a signed security agreement describing the collateral possession of collateral pursuant to an agreement with debtor. b. Creditor has given value c. Debtor has property rights in collateral

  7. Perfection Perfection occurs by filing a financing statement with the appropriate public official according to state law Creditor takes possession of collateral

  8. Financing Statement • Varies according to state law. • Generally Includes: • Names and addresses or parties • Description of collateral • Signature of debtor

  9. Priority Perfected security interests take priority over nonperfected interests. Between perfected interests priority is determined by time of perfection. Between nonperfected interests priority is determined by date of attachment.

  10. Purchase Money Security Interest • A security interest is a purchase money security interest to the extent that it is • A. Taken by the seller to secure all or part of its price. • B. Taken by a person who by making advances gives value to enable the debtor to acquire rights in or use of the collateral

  11. Purchase Money Security InterestSpecial Rules / UCC 9-312 • Noninventory Goods – Purchase money security interest in noninventory goods takes priority from date of attachment if perfected within ten days of that date. • Inventory Goods – Purchase money security in inventory goods takes priority over conflicting security interest in the same inventory if: • Interest is perfected when debtor takes possession • Notice is given to holders of conflicting interests before debtor takes possession

  12. Duration A filed financing statement is effective for fine years from the date of filing. A continuation statement may be filed within six months prior to the expiration of the five year period to extend for an additional five years.

  13. Duration • Interstate change of location • Original filing is valid until perfection would have expired under the laws of the first state or four months, whichever occurs first.

  14. Rights Upon Default • Upon Default Secured Party May: • A. Take possession of collateral or notify account debtor or obligor on instrument to make payment to him. • B. Sell collateral in a commercially reasonable manner and apply proceeds to indebtedness. • Return any surplus to debtor. • Debtor is liable for any deficiency

  15. Rights Upon Default • Sale of Collateral: • May be public or private sale • Notice given to debtor and other holders of security interests in the collateral If debtor has paid sixty per cent of the cash price or loan amount secured party must dispose of collateral within 90 days or be subject to suit for losses caused by delay.

  16. Rights Upon Default • At any time before the secured party has disposed of the collateral or entered into a contract for its disposition the debtor or any other secured party may redeem the collateral by tendering fulfillment of all obligation secured by the collateral as well as the expenses reasonably incurred by the secured party.

  17. Rights Upon Default • Secured party may retain the collateral in satisfaction of the obligation. • Must send written notice to debtor and other secured parties. If secured party receives notice of objection in writing within 21 day after notice is given the secured party must dispose of the collateral

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