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Secured Transactions Flashcards

7 cards from real DE BAR practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Secured Transactions flashcards as text

  1. A bank takes a security interest in a debtor's equipment but never files a financing statement. The debtor later sells the equipment to a buyer who knows about the security interest. What is the buyer's status?

    Answer: The buyer takes subject to the security interest because attachment alone makes it effective against the debtor and third parties with knowledge

    An unperfected security interest is still enforceable against buyers who have knowledge of it; only buyers without knowledge who give value take free under UCC 9-317(b).

  2. A debtor grants a security interest in 'all inventory now owned or hereafter acquired.' Six months later the debtor acquires new inventory. When does the security interest attach to the new inventory?

    Answer: When the debtor acquires rights in the new inventory

    Under UCC 9-204, an after-acquired property clause is effective, but attachment occurs only when the debtor acquires rights in the new collateral.

  3. A creditor perfects a security interest in a debtor's negotiable promissory note. Which method of perfection gives the creditor priority over a later purchaser who takes possession of the note for value?

    Answer: Taking possession of the note

    Possession of a negotiable instrument defeats competing claims because a purchaser who takes possession for value in ordinary course can otherwise achieve priority over a filed interest under UCC 9-330(d).

  4. A seller delivers goods to a debtor and retains a purchase-money security interest (PMSI) in the goods, which are equipment. To have priority over an earlier-filed blanket lien, the seller must perfect within what period?

    Answer: Within 20 days after the debtor receives possession

    Under UCC 9-324(a), a PMSI in goods other than inventory has priority if perfected within 20 days after the debtor receives possession of the collateral.

  5. A financing statement lists the debtor as 'Bob's Auto Shop' when the debtor is actually an individual named Robert Smith. A search under 'Smith, Robert' using the filing office's standard search logic does not disclose the filing. What is the result?

    Answer: The filing is seriously misleading and ineffective

    Under UCC 9-506, a financing statement with an incorrect debtor name is seriously misleading and ineffective unless a search under the correct name using standard search logic would disclose it.

  6. A debtor defaults, and the secured party repossesses a delivery van from the debtor's driveway at night without informing the debtor. The debtor was not present and no confrontation occurred. Is the repossession lawful?

    Answer: Yes, because the repossession occurred without a breach of the peace

    UCC 9-609 permits self-help repossession without notice or judicial process so long as there is no breach of the peace, and a peaceful nighttime taking from a driveway generally qualifies.

  7. A secured party sells repossessed collateral at a private sale for a price far below market value to its own affiliate. The debtor challenges the sale. What standard governs the debtor's challenge?

    Answer: Every aspect of the disposition must be commercially reasonable, and a low price invites close scrutiny of the sale's procedures

    Under UCC 9-610 and 9-627, a low price alone does not make a sale invalid, but it triggers careful judicial scrutiny of whether every aspect of the disposition was commercially reasonable.