During the bankruptcy, the court ordered the sports authority to start liquidating its assets, which led to a dispute over the proceeds from the sale of consignment items. Should the product go to lenders with secured shares in the sports authority or go directly to suppliers with consignment agreements that claimed they still owned the items for sale in liquidation? The acceptance of security for the full or partial performance of the obligation may take place only with the consent of the debtor within 20 days of notification. This does not require you, as a lender, to have the collateral (does not apply to consumer transactions) In order to become a secured creditor with perfect security by filing a UCC-1 with the competent registrant In the case of most goods or guarantees, the buyer must promptly complete its security right after the debtor has taken possession of the goods sold, to maintain its priority. If the security is perfected within that period, it takes precedence over the previously perfected security. The description of the title must be sufficient to identify them. Serial numbers would certainly be sufficient for devices, and a typical inventory list should suffice for inventory. Try to get as complete a description as possible. Consider attaching exhibits to describe the warranty, e.B. Certificates of ownership, invoices or shipping lists created when the debtor purchased the property. [3] Official Commentary 3 to this section contains the following: «Neither this definition nor the requirement in subsection (3) (A) rejects the deep-rooted doctrine that a contract of purchase, while absolute in form, may in fact be provided as security.
Under that article, as in previous law, a debtor may prove, by mere proof, that a transfer purporting to be absolute was actually made as security. Similarly, a self-proclaimed «lease» may serve as a security agreement if the agreement establishes a security right. See sections 1 to 203 (Distinction between security and financial leasing). In short, the old rule of contract interpretation remains true – the intention of the parties is controlled. If you sell goods on credit and lend your customer the money to buy, you are a «buyer». If you retain a security right in the assets you sell to secure payment to the debtor, it is a «purchase-money security right». Secured creditors generally have the same rights as a general unsecured creditor and also have the first claim on the security rights. A second creditor may bring an action against the debtor without the knowledge of the secured creditor. The second creditor could obtain a judgment against the debtor and seize all the debtor`s assets, including security rights. Even if the secured creditor has not commenced a lawsuit against the debtor and has not yet obtained judgment, it still has the first right in the security rights. If the second creditor brings the debtor`s assets to a court sale, the secured creditor receives all proceeds of the security up to the amount of the loan. A secured creditor is therefore not too concerned about the «race to the courthouse». A hedging stake in the product will not persist for long without taking additional measures.
It is therefore important to demand immediate payment from the debtor once your security has been sold. In the event of bankruptcy, the continued security right in proceeds is important to maintain your secured claim on the proceeds of the debtor`s recent sales. You also continue to have a security right in the debtor`s unsold inventory. At the heart of almost all secured transactions is a security agreement and a promissory note. The promissory note is a contract between a lender and a borrower in which the borrower agrees to repay the loan in accordance with the terms of the contract. In the event of default, the lender may assert claims against the borrower due to the default. However, what if the borrower is «judging» or has no assets to fulfill a personal judgment? Or worse, file for bankruptcy? This is where a security agreement comes into play and is crucial to maintaining your claims. For these reasons, the building material supplier may prefer other safety options, such as mechanical privileges .B.
However, it may still be possible to obtain a security right in construction materials, which continues to exist as a security right in the proceeds of the debtor`s sale. The carpenter`s subcontractor can return the wood to the customer free of charge. The wood supplier, which has a security right in the purchase price, now has a security right in the money that the carpenter-subcontractor receives from the builder. .
