Outline v3 - Analytical Framework

Tuesday, March 15, 2011 12:57 PM

I. Who are the Parties involved and what are there roles? Debtor Creditor Secondary Obligor Trustee in Bankruptcy
II. What is the collateral? 1. Goods i. Consumer Goods ii. Farm Products iii. Inventory iv. Equipment 2. Quasi-Intangibles i. Chattel paper (UCC 9-102(a)(11)) ii. Instrument (UCC 9-102(a)(47)) iii. Investment Property (UCC 9-102(a)(49)) iv. Documents v. Letter of credit rights 3. Intangibles i. Account (UCC 9-102(a)(2)) ii. Payment Intangible (UCC 9-102(a)(61)) iii. General Intangible (UCC 9-102(a)(42)) iv. Deposit Accounts (UCC 9-102(a)(29))

No cash phase for same filing office rule Look at problems on 181 and 182 and do problems on 195

Classify the Collateral

Evaluate if goods change. For instance, inventory ---> equipment if the D uses the inventory for his own Are these goods goods other than farm products which . . are held for business purposes. ALWAYS evaluate in the hands of sale? - INVENTORY the D Goods - all things movable at the time the SI attaches.

Are these goods held by a businesses and are not for sale? EQUIPMENT
Are the goods the raw materials resulting from D's operations in farming? - FARM PRODUCTS Are the goods used or bought for personal, family, or household purposes and not business use? - CONSUMER GOODS

Rights to Payment: CHATTEL PAPER Is it a record or records that evidence both a monetary obligation and a INSTRUMENT (poromssiorty notes) security interest in specific goods? - CHATTEL PAPER INVESTMENT PROPERTY DOCUMENTS Is it a negotiable instrument or other writing that evidence the right to LETTER OF CREDIT RIGHTS the payment of a monetary obligation (but which are not themselves either a security agreement or a lease) and are of a type that in the ordinary course of business are transferred by delivery? (Think promissory notes) - INSTRUMENT
Is it a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account? - INVESTMENT PROPERTY

Quasi-Intangibles

Intangibles

GENERAL INTANGIBLES ACCOUNTS

Is the collateral a right to payment of a monetary obligation, whether or

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Is the collateral a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. Is it health-care- insurance receivables? ACCOUNT
Is it a demand, time, savings, passbook, or similar account maintained with a bank. The term does not include investment property or accounts evidenced by an instrument? - DEPOSIT ACCOUNT Is it any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letterof-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. Is it payment intangibles or software? - GENERAL INTANGIBLES Is the claim arising in tort with respect to which: A. the claimant is an organization; or B. the claimant is an individual and the claim: i. arose in the course of the claimant's business or profession; and ii. does not include damages arising out of personal injury to or the death of an individual? - COMMERCIAL TORT CLAIMS Is it a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance? (The term does not include the right of a beneficiary to demand payment or performance under a letter of credit) - LETTER OF CREDIT RIGHTS

ACCOUNTS PAYMENT INTANGIBLES (UCC 9-102(a) (61)) GENERAL INTANGIBLE (UCC 9-102(a)(42)) DEPOSIT ACCOUNTS (UCC 9-102(a)(29)) COMMERCIAL TORT CLAIMS

Fixtures - Is the good so attached to the real property that it falls under Criteria to Determine if Fixture: real property law? i. Extent to which: i. The good is affixed to the land; ii. The good is adapted to be used with the land; and iii. The parties intended that the good be made a permanent addition to the land. HOWEVER: A good that becomes a fixture remains a good (equipment, consumer goods, etc.) After-Acquired Property (Floating Lien) Must be specified in the K (Security Agreement) - NO NEED, HOWEVER, FOR INVENTORY & ACCOUNTS RECEIVABLE - THEY ARE AUTOMATIC *Cars - certificate of title requires notation on certificate of title - NO AUTOMATIC PERFECTION FOR CARS

Characterize the Parties

Attachment - Did the Creditor Attach? If all are in place the party is a SECURED PARTY; otherwise, they are an UNSECURED PARTY

1. Did the C give value to the D (any consideration, security for preexisting claim, binding commitment to extend credit, or accepted delivery under preexisting contract)? 2. Did D have rights to the collateral or power to transfer the rights in

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2. the collateral? 3. Do C and D have a security agreement between them? i. Was the security agreement that was authenticated by Debtor, OR ii. Does C retains possession of the collateral (for noncertificated securities), OR iii. (For certificated securities): collateral is in registered form and the certificate has been delivered to C pursuant to the security agreement? iv. Does the SA adequately describe the collateral and is not super-generic? If the Party Did Not Buy Collateral from the D...
1. Did the party buy the collateral from the D? 2. Does the C have a security interest? 3. If C has a security interest, is it perfected?

If 1 = YES, then the party is BUYER. If 2 and 3 are YES, then ask: 1. Is the BUYER buying from a person in the business of selling goods of that kind (and not a pawnbroker)? i. If YES, the apply 9-320(a) - buyer is a BUYER IN THE ORDINARY COURSE OF BUSINESS ii. If NO, then ask if the BUYER buys without knowledge of the SI, for value, primarily for personal, family or household purposes, and before the filing of the filing statement. 1) If YES, then apply 9-320(b) - buyer is a BUYER OF CONSUMER GOODS If 1 = YES, then party is a BUYER. If 3 = NO (2 can be YES or NO at this point), then party is a TRANSFEREE. Apply 9-317(b) - party is a BUYER THAT RECEIVES DELIVERY. Buyer takes free of SI if buyer gives value and receives delivery of the collateral w/o knowledge of an agricultural lien or SI and before it is perfected. If tangible collateral, the collateral must be delivered. If intangible, the collateral need not be delivered

Did the party lease the goods?

LESSEE (9-317c)

Did the party get a license to use the general intangible(s)?

Did the party give collateral to secure value from the C? Did the party acquire a lien through a judicial process?

LICENSEE (9-317(d))
If YES, then the party is DEBTOR LIEN CREDITOR/TRUSTEE IN BANKRUPTCY

Did it attach in proceeds? 9-203(f): The attachment of a security interest in collateral automatically gives the secured party the rights to proceeds provided by section 9-315. Did the SI attach in fixtures?
Is the SI a PMSI? Vendor PMSI: Seller gives PMSI directly to Buyer Lender PMSI: Bank gives money Buyer who uses to purchase the collateral form Seller If so, then the party is a SECURED PARTY and the interest is AUTOMATICALLY PERFECTED; otherwise, they are an UNSECURED PARTY

PERFECTED OR UNPERFECTED
What is the collateral? How is it supposed to be perfected? Was the collateral perfected like this?
Goods 1. FINANCING STATEMENT If YES, then Perfected Secured Interest (1) Farm Products a. Does FS contain 1) D's name, 2) SP's name, and 3) the collateral covered or (2) Consumer goods a real property description (for fixtures (3) Equipment or timber extracted)? (4) Inventory (5) Fixtures i. If NO, then NOT sufficient (6) Documents b. Does FS contain 1) D's mailing address, 2) SP's mailing address, and (7) Certificated securities 3) whether D is an individual or org? (8) Instruments (9) Tangible chattel paper i. If YES, if D is an org, does FS (10) Agricultural Lien (Unless state

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(10) Agricultural Lien (Unless state statute says otherwise)

contain the type of org; the jurisdiction; and either an organization ID number or an indication the D does not have such a number? 1) If NO, then filing office MUST REJECT (But if it does take it and it is sufficient, then FS is GOOD) c. Did D authorize the filing in an authenticated record or authenticate a SA? i. If YES, then filing is proper d. SUMMARY/ADD. NOTES: If a-c are all set, then FS is good. If (b) is not set, but filing office takes it and (c) is all set, then if the FS is sufficient filing is GOOD. If there are errors, they must not be "seriously misleading" (if standard search logic would have found it). If D's name is a registered org, cannot use nickname but only legal name. Collateral description can be supergeneric. i. If D changes his name or there is a new debtor, there must be a NEW FINANCING STATEMENT. Not necessary if just disposing of collateral. However, IF NAME CHANGE the original FS is effective up to four months unless it is amendment 1) New Debtor Whether the new company is bound by the terms of the existing security agreement (especially the afteracquired property clause) and whether perfection continues turns on whether it is a new debtor. No New SA needed No new FS needed unless the business structure resulted in a seriously misleading name change (like Phillip Morris --> Altria)
2. POSSESSION a. Perfection by possession is valid for goods (9-313a) b. Possession by Agent - 9-313(a) & cmt. 3; i. In re Rolain, p. 95 ii. An agent can be the possessor, but there cannot be possession by the debtor c. Possession by Bailee - 9-313(c) i. A SP takes possession of collateral in the possession of a person other than the debtor when: ii. The person in possession authenticates a record acknowledging that it holds possession of the collateral for the SPs benefit; or iii. The person take possession of the

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iii. The person take possession of the collateral after having authenticated a record acknowledging that it will hold possession of collateral for the SPs benefit. d. SUMMARY/ADD. NOTES Perfection only lasts as long as the possession lasts.
3. AUTOMATIC PERFECTION a. PMSI in Consumer Goods (UCC 9-301(1)) Vendor PMSI > Lender PMSI Exceptions: goods that become fixtures; goods subject to state certificate of title laws; When federal statute, regulation, or treaty that preempts the perfection rules of article 9 b. PMSI in Software (9-103) c. Assignments Isolated assignment of account or payment intangible (as long as it does not assign a significant part of assignor's outstanding accounts) - 9-309(2) Sales of payment intangibles and promissory notes - 9-309(3), (4)

1. 2. 3. 4. 5.

Deposit Accounts (Only Way) Certificated Security Investment Property Electronic Chattel Paper Letter of Credit Rights

I. CONTROL (UCC 9-314) a. Deposit Accounts (UCC 9-104) i. Is SP a bank? 1) If YES, then the control is automatic. 2) If NO, then D, SP and bank must agree for SP to have access to account by DACA. Else, SP must become the bank's customer on the account 3) Exception - security interests in deposit accounts as original collateral in consumer txns are excluded from Article 9. b. Investment Property (UCC 9-106, 8-106) i. the D, the SP, and the broker have agreed that the commodity intermediary will honor the instructions of the SP c. Letter of Credit Rights A secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer or any nominated person if the issuer or nominated person has consented to an assignment of proceeds of the letter of credit under Section 5-114(c) or otherwise applicable law or practice.

If YES, then Perfected Secured Interest

(1) PMSI in Non-Consumer Goods a. Inventory (2) PMSI in Fixtures that are

1. PMSI in Inventory a. PMSI-Inventory > i. PMSIs in CP or Instruments that

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a. Inventory (2) PMSI in Fixtures that are Consumer Goods (3) PMSI in software

a. PMSI-Inventory > i. PMSIs in CP or Instruments that are proceeds of inventory; ii. Proceeds of CP and identifiable cash proceeds of inventory (checks, cash, money orders, etc.) iii. If: 1) PMSI is perfected when D receives possession of inventory 2) PMSI party sends authenticated notice to holder of conflicting interest 3) Holder of conflicting interest receives notice within 5 years before D receives possession of inventory 4) Notification states that the person sending notice currently has/expects to acquire a PMSI in the inventory AND describes the inventory
2. PMSI in Software > Conflicting interest in the same collateral 9-103(f) Dual Status Rule: A PMSI in nonconsumer goods doesnt lose its status as such even if The PM collateral secures an obligation that is not a PM obligation; Collateral that is not PM collateral secures the PM obligation; or The PM obligation has been renewed, refinanced, consolidated, or restructured. 9-103(f) & Cmt. 7(a). Transformation Rule - PMSI lien is transformed into a on-PMSI, b/c the new loan is not been used for purchasing goods, so PMSI interest may be voided by Debtor

Proceeds

Attachment recap: a SPs interest in collateral attaches automatically to identifiable proceeds received by a debtor upon disposition of that collateral. Temporary Automatic Perfection: perfection of a SI continues in proceeds for a 20-day grace period (after the SI attaches to proceeds) 9-315(c). Sometimes perfection continues after the 20-day grace period. Continuation of Perfection: On the 21st day, perfection lapses unless perfection is continued as provided in 9-315(d). 3 potential ways perfection could continue per 9-315(d): 1. Cash Proceeds Rule A security interest in cash proceeds continues indefinitely so long as the proceeds can be identified (money, checks, deposit accounts, or the like) If the debtor uses cash proceeds to buy new collateral, the SI continues in the collateral for only 20 days unless the financing statement indicates the type of collateral purchased (or the SP takes steps to perfect within the

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takes steps to perfect within the 20-day window). 9-315(d)(3). [SI in the cash paid to another is governed by the 9-332 transferee rules] 2. Same Filing Office Rule If (1) SP would file as to original collateral and proceeds at the same place AND (2) there was No Cash Phase, then SP is perfected in the proceeds (for as long as the original FS is perfected). Ex. Classic example: Inventory Accounts or Chattel paper

3. Perfect as to proceeds in the 20-day window. PMSIs PMSIs beat non-PMSIs so long as they are perfected before or within 20 days of delivery (9-324). Inventory PMSI has notice requirements (no 20-day rule; must perfect before delivery) SUMMARY/.ADDITIONAL NOTES: 9-308(a): a security interest becomes perfected when it has attached and when the applicable steps for perfection have been satisfied. (Attachment/Perfection requirements can occur in any order but perfection is not effective until both are met.) Tacking allows a security interest to be perfected by one method and remain continuously perfected if there is a shift to another method of perfection (provided there is no gap period of nonperfection)
Fixtures I. Perfection by Fixture Filing a. Requirements i. Description of the real estate ii. Indication that filed in real property records iii. Indication of types of collateral covered iv. Name of record owner, if D does not have interest of record in real property II. PMSI in Fixtures a. Has priority over real estate owner if: i. D has interest of record or possession of real estate ii. Interest arises before goods became fixtures iii. SI perfected by fixture filing before goods became fixtures or within 20 days after

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PRIORITY
Is the collateral a right to payment (ACCOUNTS, GENERAL INTANGIBLES, CHATTEL PAPER OR INSTRUMENTS)? If ACCOUNTS or GENERAL INTANGIBLES, then first to file WINS (9-322a) If CHATTEL PAPER or INSTRUMENTS 9-330(a): Chattel Paper purchaser v. Security Interest Claimed merely as proceeds. CP Purchaser beats SI in CP claimed Merely as proceeds of a SI in inventory if: 1) In good faith; 2) in the ordinary course of the purchasers business; 3) the purchaser gives new value and; 4) takes possession of the CP (or obtains control of the CP); and 5) the CP doesnt indicate that it has been assigned to an assignee other than the purchaser.
9-330(b): Chattel Paper purchasers versus other security interests in Chattel Paper. CP Purchaser beats SI in CP claimed other than merely as proceeds if: 1. The purchaser gives new value 2. takes possession of the CP (or obtains control of the CP) in good faith; 3. in the ordinary course of the purchasers business and without knowledge that the purchase violates the rights of the Secured Party. - Knowledge is defined by 9-330(f): Knowledge. 9-330(d): Instrument purchasers v. perfected SI in Instruments A purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if: The purchaser gives value; takes possession of the instrument in good faith and; without knowledge that the purchase violates the rights of the secured party. - Knowledge is defined by 9-330(f): Knowledge. Is the collateral a DEPOSIT ACCOUNT (9-327)? If so, remember perfection is by CONTROL ONLY Priority Rules are: 9-327: Control (9-104) beats non-control. Conflicting parties with control rank according of time. Except Bank holding deposit account beats conflicting SI Unless conflicting SP perfected via 9-104(a)(3)

9-340: Setoff Rights Banks setoff rights beat conflicting SI in deposit account Unless conflicting SP perfected via 9-104(a)(3)
Are there CASH PROCEEDS (9-332)? If YES, then Perfection: 9-315(b)(2): SI continues indefinitely in identifiable cash proceeds. If the money is spent on something else, SP has to reperfect within 20 days (unless the financing statement covers the new stuff). If the money is paid to someone else 9-332 Transferee of: (a) money; or (b) funds from a deposit account takes the money/funds free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of a secured party. Is there a FIXTURE? Residual Rule SP v. Mortgagee over fixtures: Mortgagee wins. 9-334(c) Exceptions Purchase Money Priority 9-334(d) - PMSI First to File or Record 9-334(e)(1) Readily Removable Collateral 9-334(e)(2) Non-reliance Creditor 9-334(e)(3) Consent or Right of Removal 9-334(f)

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Unperfe Perfecte BIOCB cted SI d SI

Buyer of Consumer Goods

LIOCB

Lien Creditor

Unperf. First to SI attach wins

Perf. SI wins

Tangibles: Buyer who 1) gives values; 2) takes delivery; 3) w/o knowledge of SI and 4) before perfection WINS
Intangibles: Buyer who 1) gives value; 2) w/o knowledge of SI; and 3) before perfection WINS

Tangibles: Tangibles: Lien Creditor Wins. Buyer who 1) Lessee who 1) gives Except Lien gives values; values; 2) takes Creditor v. 2) takes delivery; 3) w/o Filed but delivery; 3) knowledge of SI and 4) Unattached w/o before perfection SI: Lien knowledge of WINS Creditor loses SI and 4) 9-317(a)(2)(B) before & cmt. 4. Intangibles: perfection Licensees who 1) gives Remember: WINS values; 2) takes Trustee in delivery; 3) w/o Bankruptcy = Intangibles: knowledge of SI and 4) Lien Creditor Buyer who 1) before perfection gives value; WINS 2) w/o knowledge of SI; and 3) before perfection WINS
Buyer who 1) buys consumer goods; 2) gives value; 3) acts w/o knowledge of a SI; and 4) before filing of FS - WINS Lessees who 1) leases goods; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a dealer of those kinds of goods (inventory) - not farm products and not a pawn star - WINS

Perfect Perf. SI First to ed SI wins file or perfect wins

Buyer who 1) buys goods; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a dealer of those kinds of goods (inventory) - not farm products and not a pawn star - WINS

Licensees who 1) has a license in general intangibles; 2) in good faith; 3) without knowledge that the sale violates the rights of another; 4) in the ordinary course of business; 5) from a person who licenses general intangibles - WINS

CONSIGNMENTS
I. ARTICLE 9 CONSIGNMENT The Transaction Regardless of form. Person delivers goods to a merchant. For purposes of sale. (OK, so a consignment) Aggregate value of the goods for each delivery is $1,000 or more. (limiting definition to big-ticket transactions) The goods are not consumer goods immediately before delivery. (limiting definition to businessy transactions) The transaction does not create a security interest that secures an obligation. (if this is the case, then its a Secured Transaction and all of Article 9 applies). The Merchant Deals in goods of the kind delivered under a name not the name of the person making delivery. That is, this is not a situation where we know that the dealer is selling the consignors stuff. Is not an Auctioneer That is, this is not a situation where we know that the dealer is selling the consignors stuff. Is not generally known by creditors to be substantially engaged in selling the goods of others.

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 That is, this is not a situation where we know that the dealer is selling the consignors stuff.
A9 Consignment in Action Consignor = SP Consignee = D No A6 default/enforcement Treated as a PMSI in inventory. Note: 9-324 PMSI Notice requirements will apply! Consignor must perfect interest by filing a financing statement.

II. TRUE CONSIGNMENTS i. Factors Indicating True Consignment 1. The consignor reserves title to the delivered goods until they are sold; 2. The consignor reserves the right to demand return of the goods at will; 3. The consignee has the right to return goods which are not sold; 4. The consignor exerts control over the sale price; 5. The consignee is obligated to segregate the consigned goods from its own inventory; 6. The consignee is obligated to hold the proceeds of sales and forward them to the consignor; 7. The consignee is required to keep separate books and records pertaining to the goods; 8. The consignor has the right to inspect the goods and the books, records, and premises of the consignee; 9. Shipping papers and other documents refer to the transaction as a consignment; 10. The risk of loss remains with the consignor.
ii. Why Consignments matters 1. Is it a consignment or a consignment intended as a security? (Do the goods go back to consignor?) If intended as security, then Article 9 applies fully Consignor/SP must perfect. 9-600 enforcement provisions apply 2. If a consignment, is it an Article 9 Consignment? If an Article 9 consignment, SP must perfect its security interest, but part 6 enforcement provisions dont apply. If its a non-Article 9 consignment. State law would govern the rights of the parties.

DEFAULT, ACCELERATION, ENFORCEMENT, REMEDIES

I. DEFAULT Default is defined by the SA, NOT in Article 9. May include: Nonpayment Non-insurance of collateral D's removal Destruction or loss of collateral D's bankruptcy

Acceleration is a contractual term that allows the secured party to declare all amounts owed by the debtor immediately due. Article 9 Remedies 1) Reducing a claim to judgment (Judicial Enforcement) 9-601(a)(1) A SP need not pursue its Article 9 remedies. It can instead obtain an in personam judgment on the debt, then use the judicial procedures available within the jurisdiction to enforce the judgment. 2) Repossession 9-609 (Dispose or keep the collateral) A secured creditor has the right to self-help repossession pursuant to UCC 9-609, so long as the secured party does not breach the peace. But breach of Peace: uncertain definition. Potential for significant liability: 9-625 So, often self help repo. doesnt occur without debtors consent
3) Disposition 9-610 9-610(a): after default, a SP may sell, lease, license, or otherwise dispose of collateral. 9-610(b): every aspect of a disposition of collateral must be "commercially reasonable". See 9-627 The fact that a greater amount could have been obtained by a different method does not, by itself, show unreasonable disposition. 9-627(a). Can be public or private proceedings, by contract, as unit, parcels , and at any time and place

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 Can be public or private proceedings, by contract, as unit, parcels , and at any time and place Must be notice in accordance with the law

Notification date - In this section, "notification date" means the earlier of the date on which: i) a secured party sends to the debtor and any secondary obligor an authenticated notification of disposition; or ii) the debtor and any secondary obligor waive the right to notification. Notification requirements for commercially reasonable dispositions: 9-611(b)-(c), 9-612, 9-613, 9-614 Must give notice to: D Any secondary obligor Everyone who has notified Creditor of interest before notification date Anyone on file, who, 10 days before notification date, held a SI in the collateral perfected by a FS that identifies the collateral and is indexed under the D's name and filed in the correct office
4) Collection and enforcement 9-607 If so agreed, and in any event after default, a secured party: i) may notify an account debtor or other person obligated on collateral to make payment or otherwise render performance to or for the benefit of the secured party; ii) may take any proceeds to which the secured party is entitled under Section 9-315; iii) may enforce the obligations of an account debtor or other person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account debtor or other person obligated on collateral to make payment or otherwise render performance to the debtor, and with respect to any property that secures the obligations of the account debtor or other person obligated on the collateral; iv) if it holds a security interest in a deposit account perfected by control under Section 9-104(a)(1), may apply the balance of the deposit account to the obligation secured by the deposit account; and v) if it holds a security interest in a deposit account perfected by control under Section 9-104(a)(2) or (3), may instruct the bank to pay the balance of the deposit account to or for the benefit of the secured party. Collection of Rights to Payment 9-607(a)(1) permits the SP to notify the account debtor to make the payments directly to SP. The SP may enforce the account debtors obligations (that is, exercise the debtors rights with respect to the obligations). 9-607(a)(3). 5) (Acceptance of Collateral) - Strict Foreclosure 9-620 Strict foreclosure is allowed if the debtor consents. The debtor may expressly agree to the terms of the acceptance in a record authenticated post-default. Consent by silence sometimes is permitted 9-620 permits the acceptance of collateral in full or partial satisfaction of the debtors secured obligation, a process called strict foreclosure.

Effect of Disposition 9-617 i) Transfers to a [good faith] transferee for value all of the Debtors rights in the collateral; ii) Discharges the SI under which the disposition is made; iii) Discharges any subordinate security interest or other subordinate lien (subject to some exceptions).
Acceptance of Collateral (9-622): i) Discharges the obligation (the debt) to the extent consented to by the debtor; ii) Transfers to SP the Debtors rights in the collateral iii) Discharges the SI that is the subject of the Debtors consent; iv) Discharges any subordinate SIs or liens; v) Terminates any other subordinate interest. II. DEBTOR'S RIGHTS OF REDEMPTION OF COLLATERAL (9-623) i. Debtor may redeem collateral by paying the full amount of the debt plus expenses (attorney's fees, reasonable expenses) incurred by SP in repossessing the collateral and preparing for sale. ii. D cannot waive right to redemption prior to default, but may do so after default, in writing (9-624) iii. Required notice in consumer transactions: 1) 9-614(1)(C) provides that the debtor be notified of its right to redeem. iv. If SP violates any default provisions: 1) Criminal liability (for breach of peace) 2) Tort liability (may include trespass, conversion) 3) Denial of Deficiency Judgment Except to the extent precluded by non-Article 9 law, the rights to pursue judicial enforcement and Article 9 enforcement are cumulative and may be exercised simultaneously. 9-601(c) & offic. cmt. 5

CHOICE OF LAW
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CHOICE OF LAW
The general rule: the law of the debtors location governs issues of perfection, the effect of perfection, and priority (with respect to both tangible and intangible collateral, whether perfected by filing or automatically). 9-301 (1) & cmt. 4

Location of the Debtor 9-307(b) An individual debtor is located at the individuals principal residence. A 9-307(e) a registered organization debtor is located in the state of organization. 9-307(b), a non-registered organization debtor is located at its place of business if it has one, at its Chief executive office if it has more than one place of business 9-307(c) for debtor located in a foreign jurisdiction, the location will be that jurisdiction if it provides a means of public notice and obtaining priority over lien creditors. Otherwise, the location is Washington, D.C.
Exceptions Agricultural liens (9-302) Goods covered by a certificate of title (9-303) Deposit Accounts (9-304) Investment property (9-305) Letter of credit rights (9-306) Possessory security interests (9-301(2)) Security interests perfected by filing a fixture filing (9-301(3)(A)); Security interests in timber to be cut (9-301(3)(b)); Security interests in as-extracted collateral (9-301(4))

Exception: Possessory Security Interest (9-301(2)) (2) While collateral is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfe ction or nonperfection, and the priority of a possessory security interest in that collateral. Exceptions: Land related collateral Goods subject to a fixture filing and timber yet to be cut: law in the location of the collateral governs perfection, effect of perfection/non-perfection, and priority. 9-301(3) As-Extracted Collateral: The local law of the jurisdiction in which the wellhead or minehead is located governs perfection, the effect of perfection or nonperfection, and the priority. 9-301 (4) Agricultural Liens: While farm products are located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of an agricultural lien on the farm products. 9-302 Exception: Goods Covered by a Certificate of Title Perfection generally requires notation on the certificate. Filing a financing statement is neither necessary nor effective. 9 -311. Choice of Law: law of the title state governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in goods covered by a certificate of title from the time the goods become covered by the certificate of title until the goods cease to be covered by the certificate of title. 9-303 (c).
Lowest Intermediate Balance Rule

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