ch30 ②

what is the order to apply the proceeds?

1. Expenses incurred by the secured party in repossessing, storing, and reselling the collateral. 2. The balance of the debt owed to the secured party. 3. Junior lienholders who have made written or authenticated demands. 4. Surplus to the debtor (unless the collateral consists of accounts, payment intangibles, promissory notes, or chattel paper).

general rules of priority: 1. perfected security interest vs unsecured creditors and unperfected security interest: 2. conflicting perfected security interests: 3. Conflicting unperfected security interests.

1. When 2 or more parties have claims to the same collateral, a perfected security interest has priority over non-perfected 2. When there are 2 or more parties with perfected security interests in the same collateral, the first to perfect has priority 3. When 2 or more parties with unperfected security interests conflict, the first to attach (be created) has priority

when may redemption occur? (3 situations)

1. before the secured party disposes of the collateral 2. before the secured party enters into a contract for a disposition 3. before the secured party discharges the debtor's obligation by retaining the collateral

2. disposition of collateral: In order for the secured party to dispose of the collateral, the secured party must: (3)

1. dispose (sell, lease, or license) the goods in a commercially reasonable manner. 2. notify the debtor (except in sales of consumer goods) and other identified persons including those who have given notice of claims to the collateral to be sold in writing ahead of time about the sale or disposition of the collateral. 3. apply the proceeds

perfected secured party vs sequence purchaser from a debtor 3. buyer of chattel paper prevails if the buyer (3) (chattel paper = security agreement, car dealership... indicates that the seller is owed money and has security interest in the collateral)

1. gave new value in making the purchase 2. for use as a consumer goods 3. took possession without knowledge of the security interest

the requirements for the secured party to retain the collateral: (2)

1. give notice to the debtor if the debtor has not signed a statement renouncing or modifying his/her rights after defaults 2. send notice to any other secured party who has given written or authenticated notice of a claim to the same collateral or who has filed a security interest or a statutory lien ten days before the debtor consented to the retention.

perfected secured party vs sequence purchaser from a debtor 4. buyer of instruments, documents or securities (e.g. bank sells a traveler's check and the purchase of the check use to get cash in local currency = purchaser of instruments) a purchaser of an instrument has priority over a security interest in the instrument if the purchaser... (2) --> ___, ___, or ___ has priority over a previously perfected security interest.

1. gives value 2. takes possession without knowledge of the security interest

generally, a secured party's remedies can be divided in to two categories:

1. repossession 2. litigation

The secured party may take possession (peacefully or by court order) of the collateral covered by the security agreement and then pursue one of two alternatives:

1. retain the collateral 2. dispose of the collateral

perfected secured party vs sequence purchaser from a debtor 5. buyer of farm products Buyer from a farmer takes free and clear of perfected security interests unless... (2)

1. where permitted, a secured party files an effective financing statement 2. the buyer receives proper notice of the security interest before the sale.

perfected secured party vs perfected PMSI: 2. inventory:

2. A PMSI has priority if the secured party (seller) perfected and proper written or authenticated notice is given to the other security-interest holder on or before the time the debtor takes possession. e.g.) if you don't pay a store for an asset you bought from them on credit, the store can come back and repossess the asset. However, if the store fails to pay the wholesaler from which it purchased the asset on credit, the wholesaler cannot come to you and repossess the asset, providing that you are free from any prior security interest.

perfected secured party vs perfected PMSI: 3. software

3. Applies to a PMSI in software only if used in goods subject to a PMSI. If the goods are inventory, priority is determined the same as for inventory. If they are not, priority is determined as for goods other than inventory

deficiency judgement

A personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full.

judicial remedies

Alternatively, a secured party can relinquish the security interest and use any judicial remedy available = remedies at law and remedies in equity

unperfected secured party vs unsecured creditor

An unperfected secured party prevails over unsecured creditors and creditors who have obtained judgments against the debtor but who have not begun the legal process to collect on those judgments

levy

The legal process of obtaining funds through the seizure and sale of nonexempt property, usually done after a writ of execution has been issued.

30-6 rights and duties of debtors and creditors

The security agreement itself determines most of the rights and duties of the debtor and the secured party. The UCC, however, imposes some rights and duties that apply unless the security agreement states otherwise.

30-5 Priorities: When more than one party claims an interest in the same collateral, usually the party who has ___ will have priority.

a perfected security interest

termination of security interest: what can a secured party do to terminate the security interest?

a secured party can release all or part of any collateral described in the financing statement terminating

perfected secured party vs sequence purchaser from a debtor 2. buyer of consumer goods purchased outside the ordinary course of business -->___ even if perfected by attachment, providing the buyer purchased as follows (4) a b c d

a. for value b. without actual knowledge of the security interest c. for use as a consumer good d. prior to the secured party's perfection by filling

what is meant to "amend the information"?

add or substitute new collateral

A secured party can also ___. The person becomes the secured party of record if the assignment is filed by ___.

assign all or part of the security interest to a third party (the assignee) use of a uniform amendment form

perfected secured party vs sequence purchaser from a debtor 1. buyer of goods in the ordinary course of business

buyer prevails over a secured party's interest, even if perfected and even if the buyer knows of the security interest (because a buyer in the ordinary course of business takes property free from any claims.)

perfected security interest vs buyers in the ordinary course of business

buyers in the ordinary course of business

what can a secured party do at the time of filing a financial statement?

can furnish a copy of the financial statement to the filing officer

the rights and remedies of secured parties under Article 9 are

cumulative

The debtor is also not...of these types of collateral, unless that right is granted by the security agreement

entitled to any surplus from the disposition

a buyer in the ordinary course of business takes the goods free from any security interest created by the seller ___

even if the security interest is perfected and the buyer knows of its existence e.g.) A grants a security interest in its inventory to a bank. A sells one truck to B and another to C. Since B and C are buyers in the ordinary course of business, the bank's security interest in the trucks was extinguished when the vehicles were sold to them.

default occurs most commonly when the debtor: (2)

fails to meet the scheduled payments that the parties have agreed on becomes bankrupt

in what case the debtor is not held liable for any deficiency?

if the underlying transaction is a sale of accounts, chattel paper, or promissory notes

in what case, the secured party is not allowed to retain the collateral? (3)

is the collateral consists of consumer goods if the debtor has paid 60% or more of the purchase price in a PMSI if the debtor has paid 60% or more of the debt on a non-PMSI

If requested, the filing officer must ___ on possible perfected financing statements with respect to the named debtor.

issue a certificate that provides information

a party holding a lien that is subordinate to one or more other liens on the same property

junior lienholder

with consumer goods, ___

no other notice is necessary

If new collateral is added, the perfection date (for priority purposes) for the new collateral begins ___.

on the date the amendment is filed

the sale can be ___ or ___. the secured party may purchase the collateral at a___ but normally not at a___

public or private public sale private sale

1. retention: parties are sometimes better off if they do not sell the collateral. therefore, the UCC generally allows ___

secured party may retain the collateral

If the collateral is consumer goods and the debtor has paid 60 percent of the purchase price on a PMSI/debt on non-PMSI, the secured party must...

sell or otherwise dispose of the repossessed collateral within 90 days

remedies: On the debtor's default, a secured party can ___ covered by the security agreement.

take peaceful possession of the collateral without the use of the judicial process e.g.) if the buyer fails to pay the debt, the store can come to her and repossess the item

what do both party substituting new collateral need to keep in mind?

that an amendment (substituting) does not extend the time period of perfection.

what is the process of termination if the consumer goods are involved? ___. When the collateral is not consumer goods, the secured party ___ required to file or to send a termination statement unless the debtor demands one

the SECURED party (not the debtor) must have a termination statement filed within one month of the final payment twenty days whichever is earlier is not

the notification is not required if...

the collateral is perishable will decline rapidly in value

perfected secured party vs perfected PMSI 1. perfected PMSI in other collateral takes precedent over the perfected security interest of others even if second in time of perfection if...

the creditor (the seller) perfects the PMSI within 20 days after the debtor takes possession

what if a secured party fails to file or send the termination statement as requested?

the debtor can recover $500

what can the debtor do to access the unpaid debt or a list of collateral?

the debtor has a right to request a confirmation of the unpaid debt and a list of collateral without charge every 6 months.

what is the right of the debtor when he or she has fully paid the debt and it the secured party has perfected the security interest by filing?

the debtor is entitled to have a termination statement filed --> Such a statement demonstrates to the public that the filed perfected security interest has been terminated.

execution

the implementation of a court's decree or judgement

30-7 default: Article 9 doesn't define the term, instead, the UCC encourages ___ under which their rights and duties will be measured.

the parties to include in their security agreements the standards

what if the secured party fails to comply with the debtor's request?

the secured party can be held liable for any loss suffered by the debtor + $500

what if NO WRITTEN objection is received?

the secured party may retain the collateral in full or partial satisfaction of the debtor's obligation (the secured party may retain to meet the debtor's obligation)

what is the duty of the secured party receiving the request by the debtor? The secured party must comply with the debtor's confirmation request by ___ within ___ the request is received.

the secured party must authenticate and send it to the debtor an accounting within 2 weeks after the request is received.

what if the debtor or other party notified of the retention objects the retention within 20 days in a WRITTEN objection?

the secured party must sell/dispose of the collateral

in order to amend the information in the filed financing statement, what do both party need to do

they must agree and then, they file a uniform amendment form that indicates the file number of the initial financing statement.

what must the debtor or other secured party wishing to redeem the collateral?

they must tender the entire obligation that is owed + any reasonable expenses + attorney's fees incurred by the secured party in retaking and maintaining the collateral

to whom must the filing officer send the copy of the financial statement if the secured party requests? (3)

to the person designated by the secured party, to the debtor and to a person who is contemplating obtaining a security interest from a prospective debtor

however, the UCC does impose some requirements: what can the parties NOT do? Any ___ can constitute default

waive or alter certain UCC provisions e.g.) those involving the debtor's right to an accounting or deposition of collateral breach of the terms of the security agreement

by when the termination statement must be filed? (whichever is earlier)

within one month of the final payment OR within 20 days of receiving the debtor's authenticated demand