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Secured Transactions
University of Kansas School of Law
Meyer, Keith G.

Secured Transactions Outline

Article 9
I. Scope – Is Article 9 relevant and does it apply?
i. 9-109 Scope.
b. Planning – anticipation of and protect against failure.
c. Litigation – if can’t plan around.
II. Attachment – Whether a person is a secured creditor or not?
i. 9-203
b. Interest in Specific Property. Key is what collateral is.
III. Perfection – Must have attached to security interest.
i. 9-308
b. Notice, controls priority.
IV. Priority – Who wins?
i. 9-201
ii. 9-317-39
b. First in time, first in right to who files financing statement first.
c. Priority turns on status of party at time of default.
V. Default and Enforcement – What happens if one/more party claims the same collateral? Most turn over if default, but what if they don’t?
a. 9-609(a)(1)

I. Secured and Unsecured Creditors; Lien Creditor; Trustee in Bankruptcy.
a. Secured creditors have a security interest giving them the right to payment before the unsecured. The secured creditor’s position is no better than the value of the collateral.
i. Judicial Lien (involuntary) – creditor seeks a money judgment on an unpaid debt – property seized and converted to cash. Whoever gets judgment first controls.
ii. Consensual Lien (voluntary) – lien is obtained pursuant to an agreement in which debtor gives the creditor an interest (security interest) in specific property of the debtor to secure payment of a debt.
iii. Statutory Lien (involuntary) – It arises by operation of law because of a particular creditor’s status. Statutory lien gives a creditor an enforceable interest in specific goods to assure payment for goods, services, land, labor, or whatever was provided by person entitled to lien.
b. 1-201(35)(Rev.). “Security Interest” means an interest in personal property or fixtures which secures payment or performance of an obligation.
c. How does an unsecured creditor get paid?
i. Seller must sue Debtor on unpaid promissory note and obtain a monetary judgment.
ii. Under state’s law, sheriff seizes property to sell as repayment of debt. (Judicial lien)
iii. Judicial Creditor – rights over any other unsecured creditor.
d. Types of Credit
i. Secured
1. Personal Property – Article 9 (crops to be grown, but not field)
2. Real Property – real estate and mortgages
ii. Unsecured
1. Credit Cards, Utilities, Services.
iii. Alternatives to becoming Secured Creditor
1. Require payment in cash.
2. Charge a premium cost to absorb and spread risk.
3. Charge a higher interest rate.
e. Exemptions f

security interest of agricultural lien is subordinate to the rights of (2) except as otherwise provided in subsection (e), a person that becomes a lien creditor before the earlier of the time (A) the security interest is perfected.
i. Trustee in Bankruptcy is a lien creditor.
II. ATTACHMENT and Perfection
a. 9-203(a)(b)(1)-(3)(B). Attachment and Enforceability. SI attaches to collateral when it becomes enforceable against the debtor as to the collateral. It becomes enforceable when (1) value is given (2) debtor has rights in collateral (3)(A) debtor has authenticated security agreement or (B) collateral is not authenticated but in possession of secured party.
i. Attachment makes it binding between two parties. Once it is attached it is enforceable against the property of the debtor.
9-308. Perfection. Except as otherwise provided in 9-309, SI is perfected when it is attached and a plus-step requirement in 9-310-316 is met. 9-310 states a financing statement must be filed in the state office by the secured party.