MI Bar Secured Transactions 4

Question 1

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?

Accepted Answer

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

Answer

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.

Question 2

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

Accepted Answer

March 1, 2025, five years after filing

Answer

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.

Question 3

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:

Accepted Answer

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

Answer

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

Question 4

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?

Accepted Answer

The lender, because its fixture filing preceded the mortgage recording

Answer

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.

Question 5

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?

Accepted Answer

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

Answer

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

(MI Bar) Michigan Bar Exam Practice Test

(MI Bar) Michigan Bar Exam Practice Test

MI Bar Secured Transactions 4