If your business loans money and has filed a UCC-1 financing statement on your loan portfolio, then you will need to maintain your lien. There may be amendments, continuations, and terminations that will need to be filed in order to keep your lien protected - and the instrument used to perform those tasks is a UCC-3 filing.
Confused as to what a UCC-3 lien is? Don’t worry. Below is a discussion about its purpose.
For a better understanding of UCC-3s, let’s step back briefly and remind ourselves what UCC filings are and what they do. A UCC filing is essentially a financial statement that lets other creditors know that a security interest has been claimed. A UCC-3 allows you to amend an original filing, whether that be a termination, a change to your lien details, or an assignment to transfer interest to another secured party.
UCC-3s are a critical aspect of loan life cycle, and they are used in a variety of transactions to help secure assets and ensure UCC details remain accurate.
If you want to extend your UCC filing past its five-year lifespan, a UCC-3 can allow you to do that. UCC-3s can also keep lien details updated if the debtor’s name or address changes, add additional secured parties, and modify the collateral listing to reflect your loan’s current state.
UCC-3 Amendment
From continuing your original filing to terminating it, a UCC-3 is a form of amendment on the original financing statement - and there are five types.
The first type of UCC-3 amendment is the continuation. With this, you can add another five years of life to your financing statement.
Second, you have the party amendment. This is where you change or add important information about the debtor or secured party, such as a new name or address.
Third, you have the collateral amendment, which you can use to add, remove, or restate the full collateral description on the financing statement. Before UCC RA9, this was called a release.
Fourth, you have an assignment, which is used to transfer a secured party’s filing rights to another secured party. Assignments can be partial or full transfers of rights.
Finally, you have the termination. This ends your lien before the end of the five-year term.
Under UCC RA9 rules, some changes were made to how a termination is filed. The most notable change is that no signatures are needed, meaning the debtor can now file the termination. That, unfortunately, means that you might not even know your lien has been terminated. Some UCC filing providers offer monitoring services that will notify you if your lien is terminated - and it’s worth utilizing.
Mistakes When Filing a UCC-3
As with any other type of filing, you can make mistakes when filing a UCC-3. Those errors can make for big problems in the future, so here are a few things you should keep an eye on.
The first potential mistake is using the wrong file number. Usually, this occurs because a state has changed its formatting rules for file numbers.
The second mistake is the wrong file data. With the right service provider, their technology and people will help minimize the risk of this mistake occurring.
Next, it’s possible to try to cram too many transactions into a single form. Before UCC RA9, several states allowed you to perform multiple transactions on one filing, such as a continuation and amendment at once. Over half of states have changed to require only one transaction per form, which improves the electronic filing process and results in faster acknowledgments and lower costs for many states.
File Your Continuation at the Wrong Time
Finally, a mistake you can make is to file your continuation at the wrong time - either too soon or too late. It’s always best to make the necessary changes to your financing statement in a timely manner, so here are the guidelines you can follow to do so.
In the event that your debtor decides to change their name, you should file the amendment no later than four months after they are renamed.
For the most part, you can file a continuation no sooner than six months before the expiration date, which comes around every five years.
For any other type of change, you should file in a timely manner.
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.
