Article 9 of the UCC governs secured transactions. These are transactions in which a debt is joined with a creditor's interest in the debtor's personal property, such as equipment or accounts receivables or other collateral. If a debtor defaults on paying back the loan, the creditor can repossess and sell the collateral to satisfy the debt. The creditor's interest in the property is a "security interest." If a UCC lien is filed properly, it perfects the security interest of the creditor in the personal property, and it protects the creditor in case of bankruptcy or other competing claims. The knowledgeable commercial debt collections attorneys at Klapper & Fass can help safeguard your interests if you are pursuing a recalcitrant debtor.How UCC Liens Aid Creditors
In order to get a security interest under Article 9, a debtor needs to execute an agreement that grants the creditor the security interest. It attaches to the collateral once the debtor executes the agreement, value has been given, and the debtor has rights in the collateral. A UCC lien establishes the priority of security interests that are competing, particularly in the event of a debtor's bankruptcy.
Assuming the debtor is in New York, filing a UCC-1 financing statement with the Department of State is the most common way that creditors perfect their security interests. However, if the collateral is a fixture or timber or something else that is attached to real property, the filing should be made in the county where the real property is located.
A UCC-1 financing statement is a legal form that gives public notice of the creditor's interest in the collateral of the debtor. Through this statement, the creditor provides notice that it has a lien against a piece of property, and it has the right to take possession of the debtor's personal property in order to get repaid for a debt. It also establishes that the creditor's security interest has a certain priority among various creditors' interests in the debtor's property.
The statement must describe the collateral, identify the debtor, and identify the secured creditor. Before filing the statement, a creditor should conduct a UCC lien search to see whether other creditors have perfected security interests in the same collateral. However, even if there are other interests that have priority ahead of .the creditor, the creditor should nonetheless file a UCC-1 financing statement.
Once filed, the security interest is perfected, and the creditor's interest takes priority over any party that subsequently files, such as another lien creditor or a bankruptcy trustee. The statement should be filed immediately after the security agreement has been executed, except in the case of a purchase money security interest. In the latter case, the statement should be filed before shipping or delivery of the goods.
A UCC-1 financing statement is valid for up to five years. It can be renewed for more five-year periods by filing continuation statements before the period ends. However, if a debtor repays the debt and the security agreement is terminated, a UCC-3 termination statement should be filed in the same jurisdiction as the UCC-1.Discuss Your Litigation Needs with a New York Attorney
If you are trying to collect a debt in New York or beyond, you can explore your options with the litigation lawyers at Klapper & Fass. We assist creditors with their collections from our main offices in White Plains and Manhattan, and we serve all five boroughs of New York City. We also provide legal services in Dutchess, Westchester, Suffolk, Orange, Nassau, and Rockland Counties, as well as in states such as Texas and Connecticut. Contact our office at 914.287.6466 or via our online form.