Article · Finance

Attachment, Perfection, Priority: The Three Questions Every Secured Lender Must Answer

49 U.S.C. § 44107

Type
Article
Jurisdiction
National
Date
2024-06-11
Topic
Finance

Article 9 reduces the whole of secured lending to three questions asked in a fixed order, and almost every loss a secured lender suffers comes from answering one of them carelessly. This article works through attachment, perfection, and priority in sequence, explaining what value, rights in the collateral, and an authenticated security agreement actually require, why a collateral description that works in a financing statement may be fatally inadequate in a security agreement, and how the five perfection methods map onto collateral types. It then takes up the details that generate real litigation: the debtor name rules and the search-logic safe harbor, the choice-of-law rule keyed to debtor location, continued perfection after a move or merger, proceeds, and the twenty-day purchase money grace period with its separate and unforgiving inventory notification requirement. Part four works the priority ladder, including why control beats everything in a deposit account and why the buyer in ordinary course takes free of a perfected interest the buyer knows about. Part five covers enforcement and the rebuttable presumption rule that punishes a sloppy foreclosure sale, and part six covers what happens when the debtor files bankruptcy, where the trustee's strong-arm power converts an unperfected interest into no interest at all.

Attachment, Perfection, Priority: The Three Questions Every Secured Lender Must Answer

Finance > Secured Transactions | Published 11 June 2024 - Updated 28 February 2026 | UpLaw - uplaw.us

In brief. Every Article 9 problem is three questions in a fixed order. Attachment: does the creditor have an enforceable interest against the debtor? Perfection: is that interest good against third parties? Priority: when two people claim the same collateral, who wins? Ask them out of order and you will get the wrong answer. Skip one and you will lose the collateral in bankruptcy, which is the only place the question ever really gets tested.

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