Question

Zia wanted to buy a camping trailer. She didn’t have enough money to pay for a brand-new trailer, so she approached her Bank for a loan. Zia and the Bank negotiated a loan agreement. The Bank then completed and filed a financing statement at the Personal Property Registry office.

A) With respect to the camping trailer, what kind of creditor is the Bank? (.5 mark)

B) Filing the Financing Statement gives ___________________ to subsequent secured creditors (.5 mark)

Zia sold her camping trailer to Tamu but Zia still had $6000 left to pay on her bank loan. Zia then stopped paying on her loan.

C) What remedy, if any, does the Bank have with respect to Zia’s unpaid loan? Why? (1 mark)

Please use full sentences, proper grammar, punctuation and spelling. Your answer to this question must not be longer than 25 words.

Business law- course

Answer 1

Requied A: Bank is a creditor with Purchase Money Security Interest (PMSI).

It is a special type of security interest which arises when the lendor / creditor advances funds used by the borrower to purchase the collateral. A lender with PMSI has priority over all other types of security interest in the same collateral (if the PMSI is properly perfected)

Required B

Filing the Financing Statement gives information/knowledge of perfection to subsequent secured creditors.

Required C

Filling a financing statement in the appropriate public office gives a lender a legally enforceable rights against the borrower and all other paties claiming an interest in the same collateral.

It provides protection even against a Subsequent purchaser from the borrower / debtor without the knowledge of perfection.

Thus, the bank has the right to collect the unpaid loan of $6000 from Tamu.

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