[REG] Secured Transactions
Secured Transactions
personal property > collateral
real estate > mortgage
Process
Attachment(creditor vs debtor)
- interest attaches, debtor defaults> creditor has right to take the collateral from the debtor
- not provide the creditor with rights against 3rd parties who might also have an int in the collateral
- 3 prerequisites
1) parties have to agree to create a security interest
2) secured party must have given value in exchange for the security int
3) debtor must have rights in the collateral
Perfection(Creditor vs 3rd parties)
- notice that the creditor has a security int in the collateral
- creditor rights in the collateral superior to certain 3rd parties
Article 9(UCC)
| Applicable - most contractual security int in personal property or fixtures - outright sales of accounts receivable |
Not applicable - int in land(mortgage) - wage claims(garnishment) - statutory lien |
Purchase Money Security Interest(PMSI), 할부외상거래
a special type of security int that has priority over all other types of security int
- creditor sells the collateral to the debtor on credit, retaining a security interest for the purchase price
- the creditor advances funds used by the debtor to purchase the collateral
4 broad categories of collateral
- goods
- intangible
ex) money you owe your doctor after a checkup
- investment property
- proceeds
Attachment and perfection of the security interest
Creation(attachment) of the security interest
3 prerequisites 1) Agreement 2) creditor gives value 3) debtor has rights to collateral
agreement
- in writing, must be signed by the debtor
- oral, secured party takes possession of the collateral(pledge)
- upon attachment, the creditor is a "secured" creditor
- interest in future property, " after-acquired property clause" in the security agreement
* Secured party has a duty to
- file or send the debtor a termination statement when the debt is paid
- Confirm for the debtor the unpaid amount left on the secured debt
- use reasonable care to preserve any collateral in the secured party's possession > Oral agreement is OK
Perfect
- The date of perfection cannot be before the date of the attachment but occur at the same time
- 5 Methods of perfection:
1) filing, 2) taking possession of the collateral(pledging), 3) control, 4) automatic perfection, 5) temporary perfection
perfection by filing
- not perfect deposit accounts and money
- Documents to be filed(the Financing Statement) Debtor must give the creditor express or implied authorization to file
* Financing statement: name, addresses of the debtor and creditor, indication of the type of collateral covered by the financing statement
- can file after attachment
perfection by taking possession
- property owner can redeem the pledged item by paying back the amount borrowed
perfection by Control
security interests investment property may be perfected by "control"
- possession of certificate or notice to the broker
Automatic Perfection
- PMSI in consumer goods
- must be personal use
- PMSI in inventory or equipment collateral must be filed to be valid
- Small-scale assignment of accounts, assignment of a few accounts receivable
Temporary perfection
- 20day period for proceeds
if a creditor has a perfected security int in collateral and that collateral is sold, the creditor has a temporary, perfected security int in the proceeds of the collateral that was sold
- Movement of debtor(4month grace period)
debtor moves from one state to another, perfection in the first state generally is valid for four months after the debtor moves to the second state, creditor must perfect in the new state within this four-month period
Rights on Default
Right to take possession of and sell collateral
Taking possession
- take possession by self-help without judicial process if she can do so without a breach of the peace
Sale
- debtor and other parties(other creditors) must generally be given notice of the sale
- sales wipes out all subordinate int(lower priority, lien creditor, debtor's int)
Proceeds
1) pay the expenses of repossession and sale
2) pay creditors with a security int in the collateral in order of priority
3) Creditor with the highest priority must be paid in full before any proceeds can go to the secured creditor with the next highest priority
4) Finally, any surplus is paid to the debtor
Retention of collateral in satisfaction of debt
| Transactions not involving consumers after default, a secured party may keep the collateral in full or partial satisfaction of the debt |
Transactions involving consumers secured party may keep the collateral only in full satisfaction of the debt |
* Notice must be given in full or partial satisfaction cases
Compulsory disposition of consumer goods(60 percent rule): Sale required
- in consumer goods cases in which the debtor has paid at least 60 percent of the loan, the secured party must sell the collateral within 90 days after repossession, unless the debtor waives this right
Debtor's right of redemption
pay all creditors in full
Judicial Action(Reduce Calim to judgment)
writ of attachment: order by the court to a sheriff to seize a person's property.
Garnishment: order to a third person who holds the property of the debtor to turn the property over to a creditor
Remedies for creditor
- proceed against the collateral
- obtain a general judgment against the debtor