SECURED TRANSACTIONS — BAR ONE-SHEET (ELEMENTS & MNEMONICS)
Lean issue-spotting checklist — elements and mnemonics only. Pair with the full Secured Transactions Master Outline for depth, then practice timed essays with AI feedback at BarExamNextGen.
KEY PRINCIPLE #1 — SCOPE & CLASSIFYING COLLATERAL
Article 9 = consensual security interest in personal property/fixtures. Classify collateral by debtor's use:
- Goods — Consumer goods, Equipment, Inventory, Farm products ("CEIF").
- Intangibles/paper — Accounts, Chattel paper, Instruments, Documents, Deposit accounts, Investment property, General intangibles.
Classification drives perfection method and PMSI rules.
KEY PRINCIPLE #2 — ATTACHMENT (ENFORCEABLE INTEREST)
Attachment = Value + Rights + Security Agreement ("VRS") — all three; attaches when last occurs:
- Value given by secured party (incl. past consideration / binding commitment);
- Debtor has rights in the collateral (or power to transfer);
- Either (a) authenticated security agreement describing collateral, OR (b) secured party has possession/control.
Description must reasonably identify; "all assets / all personal property" is INSUFFICIENT in a security agreement (OK in financing statement). After-acquired property and future advances clauses allowed (after-acquired: not consumer goods beyond 10 days, not commercial tort claims). Proceeds attach automatically.
KEY PRINCIPLE #3 — PERFECTION METHODS
Perfect by — "FAPCA": File, Automatic, Possession, Control, (compliance w/) other-law":
- Filing financing statement — default for most collateral (goods, accounts, general intangibles).
- Automatic — PMSI in consumer goods perfects on attachment (no filing).
- Possession — required-ish for money; works for goods, instruments, negotiable documents, chattel paper.
- Control — required for deposit accounts & investment property/letter-of-credit rights; optional for others.
Financing statement requires "DSC": Debtor name + Secured party + Collateral indication. File where debtor located (individual: principal residence; registered org: state of organization). Seriously misleading debtor name = ineffective. Lapse after 5 years unless continuation filed.
KEY PRINCIPLE #4 — PMSI (PURCHASE-MONEY SECURITY INTEREST)
PMSI = seller-financed OR enabling loan used to acquire the collateral.
- PMSI in goods (non-inventory/equipment) — superpriority if perfected within 20-day grace of debtor's possession (beats earlier-perfected after-acquired creditor).
- PMSI in inventory — must (1) perfect before debtor gets possession AND (2) send authenticated notice to prior conflicting inventory secured parties before delivery.
- PMSI in consumer goods — perfected automatically.
KEY PRINCIPLE #5 — PRIORITY RULES
General rule — "First to File or Perfect" (FTFP) wins among secured parties (whichever is earlier, provided continuously perfected).
- Perfected beats unperfected. Unperfected vs. unperfected → first to attach.
- PMSI superpriority (above) overrides FTFP.
- Lien creditor (judicial/trustee in bankruptcy) — subordinate to security interest perfected before lien arises (PMSI gets 20-day relation-back).
- Buyers — "BOCI/BIOCOB": Buyer in Ordinary Course of Business takes free of security interest created by seller (even if perfected/known), if buys in good faith from inventory seller. BNOC (garage-sale / consumer-to-consumer §9-320(b)) takes free of automatically-perfected consumer-goods PMSI if no filing.
- Control beats filing for deposit accounts/investment property. Holder of negotiable instrument/document, and certain purchasers of chattel paper, can cut off interests.
- Fixtures — perfected fixture filing beats prior real-estate interest; PMSI fixture filing within 20 days beats prior recorded mortgage.
KEY PRINCIPLE #6 — PROCEEDS
- Security interest continues in proceeds automatically; perfection in proceeds continues 20 days, then must satisfy continuation rule (same office / identifiable cash proceeds / re-perfect).
- Trace identifiable proceeds (lowest intermediate balance for commingled cash).
- Proceeds of proceeds also covered; non-cash proceeds perfected if original financing statement covers the type.
KEY PRINCIPLE #6B — RIGHTS BEFORE DEFAULT & FILING MECHANICS
- Debtor must authorize the financing statement (security agreement authorizes filing covering that collateral).
- Secured party must file/send termination statement after debt paid (consumer goods: within 1 month or 20 days of demand).
- Wrong filing office or seriously misleading debtor name = unperfected; minor errors not seriously misleading are excused.
- Continuation statement must be filed within the last 6 months of the 5-year period; late lapse makes interest unperfected retroactively against earlier purchasers/lien creditors.
- Change in debtor location to new state — must reperfect within 4 months; new debtor by merger — file within 1 year.
KEY PRINCIPLE #7 — DEFAULT & REMEDIES
On default secured party may — "RRD": Repossess, Resell, Deficiency":
- Self-help repossession allowed if NO breach of the peace; otherwise judicial action.
- Disposition (sale) — commercially reasonable, with reasonable authenticated notice to debtor + other secured parties (consumer goods: notice to debtor). Apply proceeds: expenses → secured debt → junior interests → surplus to debtor.
- Strict foreclosure★ ONE-LINE ATTACK ORDER
Scope (Article 9?) → classify the collateral → attachment (value + rights + security agreement) → perfection (file/possess/control/automatic) → identify competing claimants → priority (first-to-file-or-perfect, PMSI superpriority, buyers, lien creditors, control) → default & enforcement.