At Delancey Street, we talk to business owners under debt pressure every day, and they sometimes come to us after discovering a Uniform Commercial Code (UCC) filing against their business in their Secretary of State’s records. Quick version: There are things you can try to do on your own, but self-help almost never makes it go away. The rest of this post comes from California, where fraudulent UCC-1s and Notices of Judgment Lien have been filed by disgruntled folks who seem to be “sovereign citizen” types. Every state is different. We have been focused on the issues of California, because that’s where the problem has been documented.
Before you can decide whether to fight a UCC filing, it helps to understand what one is. Every state has a UCC office; for most states, it’s the Secretary of State. That’s where UCC filings are recorded. A UCC-1 is simply a document that provides public notice that the creditor has a security interest in property owned by the debtor. That property can be inventory, equipment, receivables, etc. It usually arises from a secured transaction, like a loan to a business that’s secured by business assets. For example, a car dealer takes out a loan to finance its inventory, and the lender files the UCC-1 to give the public notice of its security interest in the cars. The creditor files to perfect its interest and establish priority in case of default or bankruptcy. In California, the debtor has to expressly authorize the filing of a UCC-1. The authorization isn’t on the filing form; it typically is in the loan agreement. In California, another type of UCC filing is a Notice of Judgment Lien (abbreviated “JL-1”). This notice is non-consensual, and gives notice that the creditor won a lawsuit and got a judgment.
Here is the part that surprises most business owners. A bogus filing can do real damage. When a lender looks at a UCC-1 they might think “this is a warning sign. It means all their assets are pledged against existing loans, so they might not have a lot of access to new funds”. Or maybe the lender might think “this looks like a shady business, they’re doing weird secured deals”. A bogus JL-1 filing can make it appear your business lost a lawsuit. The California SOS UCC office is purely ministerial: they only check that the filing is complete. They do NOT check that the debtor authorized the UCC-1 filing, or that there is a judgment. Theoretically anyone can file against anyone. Of course, a false filing has no legal force. But it is there in the database and tells the world that the “debtor” owes the “creditor.” The CA SOS will not delete a UCC-1 or a JL-1 without an order or judgment from a California court.
Remove the UCC-1
So what can you do on your own? The simplest step is often overlooked: call the person who filed the UCC-1 and ask them to remove it. Why? Because the UCC-1 says that they are the “creditor,” which means that they have the right to amend or remove it. If that doesn’t work, you can file a UCC-3 amendment. The UCC-3 has a box for the debtor to terminate the UCC-1. BUT, what that doesn’t do is remove the UCC-1. It just gets added as a new document under the file the UCC-1 exists in. So it remains searchable, and the public has to decide whether the UCC-1 is valid or not. And the business name will still show up as a debtor.
Another option is to file a UCC-5 information statement. It has boxes where you can check that the UCC-1 is inaccurate, was wrongfully filed, or was filed by someone not entitled to. There’s also a text box in the form where you explain what’s wrong with the UCC-1. Same thing: it doesn’t remove the UCC-1 or the name from the search.
Bring Suit Against the “Creditor.”
If the self-help route is taken, it won’t result in a court-ordered expungement of the lien. It won’t award compensation for any damages. An effective option is to bring suit against the “creditor.” A false public record showing your business owes money is defamatory. You can bring a suit for defamation per se and for trade libel. Abuse of process (for wrongfully using the SOS) might also be available. Most important, Code of Civil Procedure section 765.010 prohibits filing a lien or other encumbrance, knowing it is false with intent to harass. A violation of this code section opens the door to expungement, a $5,000 civil penalty. (Cal. Code Civ. Proc. 765.040.) It also allows the business to recover costs and attorneys’ fees. (Cal. Code Civ. Proc. 765.030.) A lawsuit can take time and money, but it can be the most effective way to obtain full expungement, and may compensate the business for its harm. The Legislature is considering AB 501, which would increase the penalty from $5,000 to $15,000 and allow the debtor to recover three times the amount of court fees paid by the debtor to expunge it under the Commercial Code. As of January 15, 2026, it was pending review by the Appropriations Committee.
A Genuine Debt
One last word, because not every filing is a fraud. Many of the owners we talk to discover a UCC-1 on their public record that is real. We are a business debt settlement company, not a law firm. If the owner is sure the filing is fraudulent, we don’t settle a fake debt: we refer him or her to a trusted independent lawyer. That’s a litigation matter. If, however, the UCC-1 belongs to a funder or lender - say for a merchant cash advance, SBA loan, or equipment financing - the filing stands for a genuine debt, and that’s where we enter. Our senior advisors work with funders and lenders to settle for less than the full balance owed. Our first consultation is always free and confidential, and we’ll tell you on that call if there’s a less expensive way forward.
