LA Bar Secured Transactions 2 — Questions and Answers
Question 1: Which of the following types of collateral can be perfected by either filing a financing statement OR by the secured party taking possession?
- Deposit accounts
- Chattel paper (Correct answer)
- Letter-of-credit rights
- Electronic chattel paper
Correct answer: Chattel paper
Under UCC 9-312 and 9-313, a security interest in tangible chattel paper may be perfected by filing a financing statement or by the secured party taking possession of the paper.
Question 2: A bank takes possession of a negotiable promissory note as collateral for a loan without filing a financing statement. Is the bank's security interest perfected?
- No, filing is always required for negotiable instruments
- Yes, possession alone perfects a security interest in instruments (Correct answer)
- No, the bank must also notify the maker of the note
- Yes, but only for a temporary 20-day period
Correct answer: Yes, possession alone perfects a security interest in instruments
UCC 9-313(a) provides that a security interest in instruments may be perfected by the secured party taking possession of the instrument.
Question 3: Under UCC Article 9, an initial financing statement is effective for how long before it lapses?
- 3 years from the date of filing
- 5 years from the date of filing (Correct answer)
- 10 years from the date of filing
- Until the secured obligation is paid in full
Correct answer: 5 years from the date of filing
UCC 9-515(a) provides that a filed financing statement is effective for five years after the date of filing, after which it lapses unless a continuation statement is timely filed.
Question 4: Under Article 9, a purchase money security interest (PMSI) in consumer goods is perfected:
- Upon filing a financing statement with the Secretary of State
- Automatically upon attachment, without any filing requirement (Correct answer)
- Only when the debtor takes actual delivery of the goods
- When the debtor authenticates the security agreement
Correct answer: Automatically upon attachment, without any filing requirement
UCC 9-309(1) creates an exception that perfects a PMSI in consumer goods automatically upon attachment, eliminating the need to file a financing statement.
Question 5: To extend a financing statement beyond its initial 5-year period, a continuation statement must be filed within:
- Any time during the 5-year period
- The 6-month window before the financing statement lapses (Correct answer)
- 30 days after the financing statement lapses
- 1 year before the financing statement lapses
Correct answer: The 6-month window before the financing statement lapses
UCC 9-515(d) requires a continuation statement to be filed within six months before the financing statement lapses, extending effectiveness for another five-year period.
Question 6: Under Revised Article 9, which is the ONLY method to perfect a security interest in a deposit account when it is taken as original collateral?
- Filing a financing statement
- Possession of account documents or passbooks
- Control of the deposit account (Correct answer)
- Written notification to the depositary bank
Correct answer: Control of the deposit account
UCC 9-312(b)(1) provides that a security interest in a deposit account as original collateral may only be perfected by control, not by filing or any other method.
Question 7: Under Revised Article 9, a financing statement covering a registered organization (such as a Louisiana LLC) must use the debtor's name as it appears on:
- The debtor's most recent federal tax return
- The most recently filed public organic record, such as the articles of organization (Correct answer)
- Any trade name under which the debtor regularly does business
- The debtor's most recent annual report filed with the state
Correct answer: The most recently filed public organic record, such as the articles of organization
UCC 9-503(a)(1) mandates using the name indicated on the most recently filed public organic record of the registered organization, making any trade name or DBA insufficient.
LA Bar Secured Transactions 2
Which of the following types of collateral can be perfected by either filing a financing statement OR by the secured party taking possession?