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Overview of Uniform Commercial Code-1 (UCC-1)
Definition of
Uniform Commercial Code-1 (UCC-1)
What is a Uniform Commercial Code-1 (UCC-1) Financing Statement? A Uniform Commercial Code-1 (UCC-1) financing statement is a legal form that a creditor files to give public notice that they have a security interest in specific personal property (collateral) of a debtor. This filing "perfects" the creditor's security interest, which typically gives the creditor priority over other creditors if the debtor defaults on the debt and the collateral needs to be seized. UCC-1 filings are governed by Article 9 of the Uniform Commercial Code (UCC).
Activities Related to
UCC-1 Financing Statement
Here is a list of UCC-1 related activities:Â Lenders (secured parties) preparing and filing UCC-1 statements with the appropriate state office (usually the Secretary of State) when a loan is secured by personal property assets, Debtors granting a security interest in their property as collateral, Accurately describing the collateral covered by the security interest in the filing, Searching UCC records to check for existing liens on property before extending credit or purchasing assets, Filing continuation statements to maintain the effectiveness of a UCC-1 filing (which typically expires after five years), and Filing termination statements once the secured obligation has been paid off.
The Importance of
UCC-1 Financing Statements
UCC-1 financing statements are important because they are the primary legal mechanism for creditors to establish and protect their security interests in a debtor's personal property collateral. By filing a UCC-1, a lender provides public notice of their claim, which can give them priority over other creditors or subsequent purchasers of the collateral in the event of the debtor's default or bankruptcy. For businesses, understanding UCC-1 filings is crucial both when seeking secured financing (as a debtor) and when extending credit and taking collateral (as a creditor). It is a key part of the loan preparation and due diligence process in secured lending.
Key Aspects of
UCC-1 Financing Statement
Public Notice
Creates a public record of a creditor's security interest in specified collateral.
Perfection of Security Interest
Filing typically "perfects" the security interest, establishing the creditor's priority claim against the collateral relative to other parties.
Governed by UCC Article 9
The rules for filing, content, duration, and termination are detailed in Article 9 of the Uniform Commercial Code.
Applies to Personal Property
Used for securing interests in various types of personal property (e.g., equipment, inventory, accounts receivable), not real estate (which uses mortgages or deeds of trust).
Concepts Related to
UCC-1 Financing Statement
The UCC-1 Financing Statement is a key document under the Uniform Commercial Code (UCC), specifically Article 9, which deals with secured transactions. It is used to perfect a security interest in collateral, which is an asset pledged to secure a debt or liability. This process is fundamental to secured lending and loan preparation when personal property is involved.
UCC-1 Filing
in Action:
The Adventures of Coco and Cami
Cami gets a loan to buy a new, expensive coffee roasting machine, and the lender uses the machine as collateral. The lender then files a special form.
Professor A explains that this form is a UCC-1 Financing Statement. It tells the world that the lender has a claim on Cami's roaster until the loan is paid off, protecting the lender's investment.