Question

Law of Accountants:
-What is a security interest
-What does Art 9 of the UCC cover-and hat is not covered
-What does the word attachment mean under Art. 9
-What is required for a security interest to be perfected-how does perfection happen
-Why do we care about all of this

-Have you ever thought about how many credit transactions happen every day for purchases of things, not real estate? How much money do you think is involved?

Answer 1

- Security interest is an enforceable legal claim or lien on collateral that has been pledged, usually to obtain a loan. The borrower provides the lender with a security interest in certain assets, which gives the lender the right to repossess all or part of the property if the borrower stops making loan payments. The lender can then sell the repossessed collateral to pay off the loan.

- Only covers goods and proceeds sold on credit terms moving forward – does not cover existing debt. The debtor must agree and sign off. Must describe in detail the goods or inventory that is covered. Always do a UCC search to determine existing secured parties.

- Attachment can be said to happen when a security interest is effectively created between a debtor and a creditor. This is usually provided for in the agreement between the two parties.

- In some legal systems, perfection of a security interest requires notice to be given to a relevant third party. This most commonly arises in relation to security over a debt or other chose in action, notice being required to be given to the party owing the debt or holding the fund.