The Deadlines for Each Type of Filing
If you sell on credit, file the UCC early. Once you have signed the security agreement, filing makes you a secured creditor, and note there’s a deadline for each type of filing. Miss one, and you can lose the secured creditor status.
When selling equipment on credit in the US, the UCC-1 is due no more than 20 days after the customer receives the equipment.
When selling equipment in Canada on credit, the PPSA filing is due no more than 15 days after the customer gets the equipment.
If you sell inventory or consigned goods to customers on a payment plan, first record your UCC-1, run the reflective search, and send and have received your notification letters. Then you can ship as a secured creditor. Do it in the wrong order, and you may go unsecured. If you sent the notification letters, it may seem like you’re okay, but until the letters have been received, this is untrue. All steps must be completed.
For a blanket filing, record the UCC-1 before the goods even leave your warehouse to go to the customer.
It’s also up to you to terminate the original financing statement. By law (UCC Section 9-513), you need to do it within 20 days after the debtor requests it, if one of these conditions is met.
- The first condition is that collateral secures no obligation now and none is expected in the future.
- The second condition is that the filing covered consigned goods, and the debtor no longer possesses them.
- And the third condition? The debtor never authorized the original filing.
If you don’t terminate your filing in a timely manner, it stays in effect until it lapses 5 years later, which can cause problems for the debtor with the bank. Ending your filing on time means that the record is always clean and clear.
Legal Name
Under the 2010 Article 9 Amendment, to confirm the registered organization’s legal name, consult the public organic record, such as articles of incorporation, and any amendments and reinstatements.
The state Corporate Certificate is just a data-entered copy of the organic record - it’s not enough. So always pull the organic record first and validate the name, instead of the certificate, when you file. If a corporation’s name is mistranscribed, the filing could be seriously misleading and leave you unsecured.
If a debtor changes their name, and you miss the amendment, you could go unsecured. You have up to 4 months to amend the debtor’s new name (9-507(c)) and it is your responsibility to have the correct information. The 4-month clock starts ticking when the name change is made. Your contract should require the debtor to keep you informed of any name changes. For an extra measure of security, watch your customers’ names. Noticing a name change is your best option.
If you sell inventory to your customers on a PMSI, don’t neglect to notify the prior secured parties. You need to give each holder of a conflicting security interest notice of your filing, and according to Section 9-324, you need to do it within 5 years before your buyer gets the inventory. Each time you continue your filing, search again and notify each prior secured party again. Failure to do so can cost you priority in your own goods.
Have inventory at a third-party warehouse? File a UCC-1 - it shows publicly who owns it. Your warehouseman may have a lien (UCC Article 7). If the warehouse fails and you don’t have a UCC-1 filed, the bank or warehouseman could liquidate your goods without knowing the inventory is yours. That’s not a problem if you file the UCC-1.
If you are a consignment seller, then please review Revised Article 9. To beat a prior secured interest, you must follow the PMSI rules for inventory. As a consignor, you need a signed consignment agreement, a filed financing statement, a search, and letters notifying prior secured creditors. If you skip a step, the earlier secured creditors could take the goods.
Fixtures are things affixed to real estate, like a gas pump, an oven, or an outside sign. If you sell equipment so bound to the land that real property law gives rights in it, that’s a fixture. If your security agreement mentions fixtures, consider a county fixture filing. A fixture filing is recorded against real estate at the county level. It shows up in a title search, so buyers and sellers know that your debt must be paid before property can change hands.
If you filed your UCC-1 online and it was recorded instantly, don’t assume it’s OK. A receipt only proves it went online. Each Secretary of State uses different software that may be unreliable or outdated. After every filing, run a reflective search. It’s the only way to make sure your filing was indexed correctly, and it is in the UCC-11’s search report. If it’s not there, you have a problem.
Decide Whether You Want the Goods Back
When your customer defaults on PMSI, it’s time to decide whether you want the goods back or not. Take the goods back, or leave them with the customer and go after the money.
If you don’t want the goods back, give your claim to an attorney, and let them sue. You may be able to obtain a judgment which may allow you to garnish accounts or attach assets.
If you want the goods back, you can repossess them from the customer, as long as you don’t breach the peace.
If you can’t repossess the collateral peacefully, you may ask the court for a temporary restraining order or sue the debtor.
About Delancey Street
Delancey Street is a premier, and award winning, business debt settlement company that helps business owners nationwide. Our goal is simple: help you escape debt in a safe and legal manner. Based out of New York, we can help in 49 of 50 states. We tell you how it is; because your business and future is on the line.
