Bankruptcy Outline
UCC Article 9
I. Definitions:
A. Security Interest : §1-201(37)
B. Security Agreement : §9-102 (a)(73)
C. Secured Party : §9-102 (a)(72)
D. Debtor: §9-102 (a)(28)
E. Collateral: §9-102 (a)(12)
F. Financing Statement: §9-102 (a)(39)
G. Purchase Money Security Interest : §9-103
H. Lien Creditor = a creditor who has acquired a lien on the property involved by attachment, levy or the like and includes an assignee for benefit of creditors from the time of assignment, and a trustee in bankruptcy from the date of the filing of the petition or a receiver in equity from the time of appointment.
II. Governs
A. Creation of a Security Interest UCC §9-203: 3 Step Process:
(1)Value has been given to D
(2) D has rights in the collateral
• D has ownership, or right to exclusive control/possession, right to sell goods, K to purchase
(3) S/P signs a SA describing the collateral or Secured party gets possession of the collateral)
· Three Requirements:
• The Agreement must contain sufficiently detailed and accurate description of the coll. (UCC §9-108: any description that reasonably id’s the coll. is sufficient)
• The Agreement must contain lang. that grants a S/I (“D grants S/P a S/I in” specific coll., or words of similar import)
• The Agreement must be “signed” or “Authenticated”
• Note: in some cases several docs can be read together to satisfy this requirement
· Many Questions can only be answered by looking at the Sec. Agreement itself: Does the S/I secure future advances by the secured party? Does the S/I cover after-acquired property? Does the S/I cover the proceeds of coll?
B. Perfection: – Perfection Gives creditor rights against the world.
1. S/I can be perfected 3 ways:
· filing of a financing statement (or in land record)
· S/P takes possession of the collateral
· Automatic perfection – for PMSI in consumer goods, assignment for the benefit of creditors (i.e. Lien Creditor)
2. an unperfected SI will be valued as between D and S/P, but will be invalid against certain third parties
III. Who Prevails against an Unperfected Interest: §9-317:
A. **Trustee Acting as Lien Creditor** §544
B. PMSI
C. Buyers that receive delivery
D. Lessees that receive delivery
E. Licenscees/Buyers of intangibles
F. Investment property.
G. Lien Creditor(important for §544 Strong Arm Clause) – includes judicial liens – this is a person who the debtor assigns all his property to for the benefit of creditors
IV. Parties that prevail against a Perfected SI §9-320 :
A. Buyer in the ordinary course of business §9-320(a)
B. Buyer of consumer goods w/o knowledge of SI §9-320(b)
V. Priorities among competing SI’s §9-322:
A. 1st in time 1st in right
B. Exceptions:
1. PMSI in inventory and other collateral will prevail over earlier perfected S/I in certain conditions
Liens
I. Creation of a Lien:
A. Attachment: lien must be made valid against the debtor
1. different types of attachment are required for each different type of lien
B. Perfection: lien must be made binding on 3rd parties. This is important if a third party (transferee) claims rights in the property
1. also
ns
· Lis Pendens: filing a notice of a pending law suit. If anyone else acquires the property they take it pending the final judgment of the court. Does not create a lien – it is a warning to 3rd Parties.
2. After Judgment:
· Judgment lien: creates a lien on all of the debtor’s property. Can relate back to the date of attachment.
· Execution: when the debtor does not pay the lien the court an seize the property.
· Garnishment: used to garnish wages etc.
III. The Effect of a Valid Lien:
A. Gives the creditor the right to enforce the lien against the 3rd parties
B. Lienholder is entitled to foreclose on the lien
C. BUT…the lien is generally subservient to any pre-existing interests perfected before the lien
D. Enforcement of:
1. Seizure
2. Foreclosure
· by sale
· or strict foreclosure: where the creditor gets the entirety of the property in satisfaction of the obligation
IV. Priorities
A. First in Time Rule
1. applies to liens and other interests in property
2. exceptions:
· states might have specific exceptions
· Good Faith exceptions may also exist
B. Purchase Money Security Interest: loan or credit is given to the debtor to allow him to acquire particular property and the property is used as collateral to secure the debt.
