Secured Transactions: Summary and Exam Preparation

Law School

This lecture provides a comprehensive overview of secured transactions under the Uniform Commercial Code (UCC), particularly focusing on Article 9. It explain how a security interest in a debtor's personal property is created (attachment) and how a creditor protects that interest against the claims of others (perfection). Various methods of perfection, such as filing a financing statement or taking possession or control of the collateral, are discussed. The texts also address recent amendments to Article 9, specifically the 2022 UCC Amendments, which introduce rules for using digital assets as collateral and clarify the definition of money. Finally, the sources touch upon the secured party's rights and procedures upon the debtor's default, including repossession, disposition of collateral, and pursuing deficiency judgments.

The primary purpose is to give the creditor a legal right to specific property (collateral) of the debtor, which they can pursue to satisfy the debt if the debtor defaults, providing a significant advantage over unsecured creditors.

The three requirements for attachment are: the secured party must give value, the debtor must have rights in the collateral, and there must be a binding security agreement.

Filing a financing statement serves as public notice to the world that the secured party has a security interest in the debtor's collateral, which is crucial for establishing priority over other potential creditors.

The four main categories of goods under Article 9 are consumer goods, inventory, equipment, and farm products.

A security interest in a gold necklace used as collateral for a loan could be perfected by the pawnbroker taking physical possession of the necklace, which serves as notice to others of their interest.

The general rule for priority between competing perfected security interests in the same collateral is that the first party to either file a financing statement or perfect their interest has priority.

Under the 2022 amendments, the definition of "money" is limited to government-backed currencies, meaning cryptocurrencies like Bitcoin are not considered "money" under the UCC.

A PMSI arises when a loan finances the purchase of specific goods used as collateral. It can have super priority over an earlier security interest if the secured party meets specific perfection requirements, such as timely filing (especially for non-inventory).

A secured party undertaking self-help repossession must do so without breaching the peace, meaning they cannot use physical force, threats, or other actions likely to provoke a confrontation with the debtor.

Disposing of collateral in a commercially reasonable manner means the secured party must conduct the sale or other disposition fairly, taking into account factors like the method, time, place, and terms of the sale to maximize the value recovered.