Key Takeaways. Article 9 is a section under the UCC governing secured transactions including the creation and enforcement of debts. Article 9 spells out the procedure for settling debts, including various types of collateralized loans and bonds.
What is collateral in a secured transaction?
A deal in which a buyer or borrower (called a debtor) guarantees payment of an obligation by giving a security interest in property to the seller or lender (called a secured party). The property in which a security interest exists is called collateral.
What does Article 9 say?
Article 9 protects your right to freedom of thought, belief and religion. It includes the right to change your religion or beliefs at any time. You also have the right to put your thoughts and beliefs into action.
When a debt is secured by property as collateral and the debtor defaults The creditor may quizlet?
If the debtor defaults and does not repay the loan, generally the secured party can foreclose and recover the collateral. A person who has an ownership or other interest in the collateral and owes payment of a secured obligation [Revised UCC 9-102(a)(28)].
How are transactions involving personal property secured?
A secured transaction is created when a buyer or borrower (debtor) grants a seller or lender (creditor or secured party) a security interest in personal property (collateral). A security interest allows a creditor to repossess and sell the collateral if a debtor fails to pay a secured debt.
What types of security interests are covered by Article 9?
Article 9 “governs security interests and applies to any transaction that creates a security interest in personal property,” including goods, inventory, equipment, accounts, documents and instruments.
What are three forms of collateral that can be used in secured transactions?
Any property accepted as security by a creditor can serve as collateral, but generally collateral falls into one of five categories: consumer goods, equipment, farm products, inventory, and property on paper.
Which of the following can be used as collateral under Article 9 of the UCC?
Under Revised Article 9 of the UCC, electronic chattel paper may be used as collateral in a secured transaction.
What are proceeds under Article 9?
As discussed in last issue’s column, revised Article 9 greatly expands the definition of “proceeds” so that a security interest in specific collateral will automatically extend to after-acquired property that is derived from the original collateral, even if there is no disposition of the original collateral.
What type of collateral may be used to obtain a security interest?
A security interest in many types of collateral, including “negotiable documents, goods, instruments, money, or tangible chattel paper,” may be perfected by the secured party possessing the collateral.
What type of court order does the secured party need to take possession of the collateral quizlet?
on the debtor’s default, a secured party can take possession (peacefully or by the court order) of the collateral covered by the security agreement. This provision, because it occurs without the use of the judicial process, is often referred to as the “self-help” provision of article 9.
Is a loan a secured transaction?
There are two primary types of loan transactions. One type is considered an unsecured transaction and the other is classified as a secured transaction. When a loan is secured, there is more protection for the lender and there is a greater risk to the buyer if a default occurs.
What does it mean to secure a transaction?
In finance, a secured transaction is a loan or a credit transaction in which the lender acquires a security interest in collateral owned by the borrower and is entitled to foreclose on or repossess the collateral in the event of the borrower’s default.
What is collateral under the UCC?
(12) “Collateral” means the property subject to a security interest or agricultural lien. The term includes: (A) proceeds to which a security interest attaches; (B) accounts, chattel paper, payment intangibles, and promissory notes that have been sold; and. (C) goods that are the subject of a consignment.
What is the difference between a secured and unsecured transaction?
Key Takeaways. Unsecured debt has no collateral backing. Lenders issue funds in an unsecured loan based solely on the borrower’s creditworthiness and promise to repay. Secured debts are those for which the borrower puts up some asset as surety or collateral for the loan.
At what point does a creditor become a secured party with an interest in the collateral?
Attachment – when a security agreement is executed and the debtor acquires right in the assets subject to the security interest (collateral). The creditor’s security interest becomes enforceable.
At what point does a creditor become a secured party with an interest in the collateral quizlet?
At what point does a creditor become a secured party with an interest in the collateral? When attachment occurs, the creditor becomes a secured party with an interest in the collateral. trustee in a liquidation proceeding sells the exempt assets and distributes the proceeds of the sale among the creditors.
Which of the following is not a topic covered by the Uniform Commercial Code UCC )?
There are many business-related contracts that the UCC does not cover, including real estate contracts, service contracts, and employment contracts.
Are mortgages covered by UCC Article 9?
Article 9 applies to both a security interest in a mortgage note to secure an obligation and to the rights of a buyer of a mortgage note. UCC § 9-109(a)(1) and (3). Article 9 thus determines the requirements for an “effective” transfer of rights in those two situations.
What type of collateral must be perfected through possession?
Certain types of collateral may or must be perfected by possession. Money, for example, must be perfected by possession of the secured party. A security interest in instruments, certificated securities, chattel paper, goods and negotiable documents may be perfected by possession.
What type of collateral is a contract?
Collateral contracts are independent oral or written contracts that are made between two parties to a separate agreement or between one of the original parties and a third party. This type of contract is usually made before or simultaneously with the original contract.
What are the nine articles of the UCC?
The nine articles of the UCC is a set of laws governing the sale of goods, leases of goods, negotiable instruments, bank deposits, fund transfers, letters of credit, bulk sales, warehouse receipts, bills of lading, investment securities and secured transactions.
What provisions allow creditors to repossess and sell loan collateral when the loan is in default?
Section 9-609 of the Uniform Commercial Code (UCC) permits the secured party to take possession of the collateral on default (unless the agreement specifies otherwise):
When a borrower pledges collateral to obtain a loan the lender is known as a secured creditor?
What Is a Secured Creditor? A secured creditor is any creditor or lender associated with an issuance of a credit product that is backed by collateral. Secured credit products are backed by collateral. In the case of a secured loan, collateral refers to assets that are pledged as security for the repayment of that loan.
When a debtor sells collateral he or she receives _____ something that is exchanged for collateral?
When the debtor sells collateral, he or she receives proceeds, something that is exchanged for collateral. The secured party automatically has an interest in the proceeds. If 2 parties provide a loan based on the same collateral, the party with the secured interest will have priority on the collateral.
What are the 3 requirements for a creditor to have an enforceable security interest?
For a security interest to attach, the following events must have occurred: (A) value must have been given by the Secured Party; (B) the Debtor must have rights in the collateral; and (C) the Secured Party must have been granted a security interest in the collateral.
Does a collateral assignment create a security interest?
This is a standard form of Collateral Assignment of Acquisition Agreements between a grantor and a secured party. It is intended to create a security interest in the grantor’s contracts rights under a specified acquisition agreement under UCC Article 9.
Where is the appropriate place for a secured party to file a financing statement quizlet?
To perfect a security interest in goods, where must a creditor file a financing statement? With the office of the secretary of state of the state where the debtor is located.
When two creditors have a security interest in the same collateral which party takes priority quizlet?
when two or more secured parties have perfected security interests in the same collateral, the first to perfect has priority.
What is an example of a secured transaction?
Two simple examples of secured transactions are: (1) a bank loaning a business money so it can buy inventory; and (2) a company selling a business equipment on credit. In both examples, to create a secured transaction, the debtor would sign a security agreement.
What is the simplest type of secured transaction?
“means the property subject to a security interest or agricultural lien.”Uniform Commercial Code, Section 9-102(12). Purchase-money security interest. (PMSI) is the simplest form of security interest.
What is a secured transaction What are the requirements to perfect a security interest?
A secured transaction is a contract between the debtor and the secured party. Like most contracts, there must be an exchange of consideration between the parties. In other words, there must be an exchange of value. In the case of secured transactions, the value given by the secured party is usually obvious.
Which of the following can be used as collateral under Article 9 of the UCC?
Under Revised Article 9 of the UCC, electronic chattel paper may be used as collateral in a secured transaction.
When a debt is secured by property as collateral and the debtor defaults The creditor may?
If the debtor defaults under its obligation, the secured creditor may proceed to sell the assets representing the collateral under the secured party’s Credit Agreement.
What is the difference between a secured creditor and an unsecured creditor?
The secured creditor holds priority on debt collection from the property on which it holds a lien. The unsecured creditor gets no such protection; its best method of repayment from its debtor is voluntary repayment.
When there are two perfected secured creditors in the same collateral?
A security agreement must be backed by a written record even if the creditor has possession of the collateral. If two creditors have a security interest in the same collateral, their priority is determined according to the “last in-first out” provision.
At what point does a creditor become a secured party with an interest in the collateral quizlet?
At what point does a creditor become a secured party with an interest in the collateral? When attachment occurs, the creditor becomes a secured party with an interest in the collateral. trustee in a liquidation proceeding sells the exempt assets and distributes the proceeds of the sale among the creditors.
What signifies that a creditor has become a secured party?
To become a secured party, the creditor must obtain a security interest in the collateral of the debtor.
Which of the following is not a topic covered by the Uniform Commercial Code UCC )?
There are many business-related contracts that the UCC does not cover, including real estate contracts, service contracts, and employment contracts.
Which of the following items would not be considered a good under the UCC?
Minerals taken from real estate and sold by the owner and soil taken from real estate and sold by the owner are considered goods under the UCC, but the right to remove soil from real estate is not considered a good under the UCC.
What items are covered by Article 2 of the UCC?
Article two only covers the sale of goods. This is important to keep in mind. Goods include all items that can be both identifiable and moveable at the time of the sale. Article 2 does not cover transactions involving service contracts.
Does UCC apply to loans?
The UCC articles govern various types of transactions, including banking and loans.
Does UCC apply to mortgages?
The UCC is a model code sponsored by the American Law Institute and the Uniform Law Commission that governs commercial transactions and has been enacted, in one form or another, in each of the 50 states. Generally, Articles 3 and 9 of the UCC are relevant to mortgage loans.
What are proceeds under Article 9?
As discussed in last issue’s column, revised Article 9 greatly expands the definition of “proceeds” so that a security interest in specific collateral will automatically extend to after-acquired property that is derived from the original collateral, even if there is no disposition of the original collateral.
What are examples of collateral for a secured loan?
Types of Collateral You Can Use
- Cash in a savings account.
- Cash in a certificate of deposit (CD) account.
- Car.
- Boat.
- Home.
- Stocks.
- Bonds.
- Insurance policy.
Which of the following is an example of collateral?
Mortgages — The home or real estate you purchase is often used as collateral when you take out a mortgage. Car loans — The vehicle you purchase is typically used as collateral when you take out a car loan. Secured credit cards — A cash deposit is used as collateral for secured credit cards.
What is possessory collateral?
Possessory Collateral (Banking & Finance Glossary) Collateral which only needs to be possessed by the Secured Party in order to Perfect the Security Interest in the Collateral. While this Collateral can be perfected by the filing of a Financing Statement as well, possession generally grants a higher priority.
What does perfecting collateral mean?
Perfected Collateral means Collateral consisting of Acceptable Collateral Assets held in the Collateral Account with respect to which the Collateral Requirement has been satisfied.