Secured Transactions Flashcards

A lender wants a PMSI in a retailer's new inventory to have priority over an earlier-filed inventory financer. What must the lender do?

Answer: Perfect before the debtor receives the inventory and send authenticated notice to the earlier-filed financer

Under UCC 9-324(b), an inventory PMSI requires perfection by the time the debtor receives possession plus advance authenticated notice to conflicting inventory secured parties.

A financing statement was filed on March 1, 2020. No continuation statement is ever filed. When does the financing statement lapse?

Answer: March 1, 2025, five years after filing

Under UCC 9-515(a), a financing statement is effective for five years and lapses unless a continuation statement is filed in the last six months.

A debtor uses a drill press primarily in its machine shop, though it occasionally lends it to employees for home projects. For Article 9 classification purposes, the drill press is:

Answer: Equipment, because classification depends on the debtor's primary use

Collateral is classified by the debtor's principal use at the time the security interest attaches, making business-used machinery equipment.

A furnace is installed in a building and becomes a fixture. A lender perfected a security interest in the furnace by a fixture filing before the debtor granted a mortgage on the building. Who has priority in the furnace?

Answer: The lender, because its fixture filing preceded the mortgage recording

Under UCC 9-334(e)(1), a security interest in fixtures perfected by a fixture filing before the real property interest was recorded has priority.

A debtor in default owes $8,000 on a loan secured by a boat worth $20,000. The secured party proposes to keep the boat in full satisfaction of the debt (strict foreclosure). The debtor timely objects in writing. What must the secured party do?

Answer: Dispose of the collateral under UCC 9-610 rather than retain it

Under UCC 9-620, a timely objection to strict foreclosure requires the secured party to dispose of the collateral instead.

A creditor takes a security interest in a certificate-of-title vehicle held by a debtor as equipment. How is the security interest ordinarily perfected in Michigan?

Answer: By notation of the lien on the certificate of title

For goods covered by a certificate-of-title statute, perfection generally requires lien notation on the title rather than a UCC filing.

After a commercially reasonable foreclosure sale of equipment, the sale proceeds are less than the debt plus expenses. Who is liable for the shortfall?

Answer: The debtor, who remains liable for the deficiency

Under UCC 9-615(d), the obligor is liable for any deficiency remaining after a proper disposition.