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Mar 09 2018
  • By wpengine

What is a UCC financing statement?

There may come a time when a creditor has an interest in the personal property of one of its debtors to satisfy payments owed to them. In this case, they may file a legal form known as Uniform Commercial Code (UCC) financing statement. This is a public notice that the creditor has a security interest in a debtor’s property. This states a creditor is within their legal right to take possession or sell the debtor’s property for repayment of the debt they are owed. A UCC filing statement is part of placing a lien on the assets of a debtor according to UCC regulations.

Information On Statement
There is specific information required to be contained within a UCC financing statement. It essentially requires three bits of information. The statement should have the debtor’s name as well as address. The type of collateral should be indicated. It should reasonably identify all collateral used in the business relationship the debtor wants.

Perfecting Security Interest
These public notices are usually placed in local media including newspapers and more. Once this notice is published, the creditor has established they should have priority in being paid when compared to other creditors who want to pursue the debtor’s assets. This process is known as perfecting the security interest in a debtor’s property.

Filing Financing Statement
A UCC financing statement may also be filed with the real estate records of the local government for priority in payment of debts. This is done to establish the creditor’s rights against a mortgage of a debtor as well as any other liens on a debtor’s real property. The creditor’s rights will be based on credit documents associated with the UCC financing statement.

Accompanying Documents
Once UCC financing statement has been filed, a creditor should also be able to produce certain accompanying documents. These are private documents and should never be revealed in a public forum. They will be part of a UCC filing and they will be referenced. This is to prove they do exist but must continue to be private.

Private Agreement
This is a private document that provides proof that a contract existed between the creditor and the debtor. It provides the necessary evidence of the details concerning the relationship between the two parties. A private agreement may also outline a course of action in the case of default and more.

Indemnity Agreement
This is often designed as a way to indemnify a creditor against a debtor going public with their collection efforts and more. It is designed to protect a creditor’s reputation when they perform agreed upon business activities. This can also protect the debtor’s reputation when a creditor initiates collection efforts.

Types Of Property
It is possible for a business to be in default and have its debtors file a UCC financing statement on different types of property. This is often property that was used as collateral. It could include office equipment, commercial instruments including promissory notes and more. Receivables as well as real estate, inventory, vehicles, a company’s investment securities, all type of operating equipment and more.

Multiple Loans
Once a UCC financing statement is filed, and a lien is in place on a debtor’s assets, it will prevent debtors from obtaining other types of collateralized loans utilizing the same assets. If this happens, many creditors could believe they are entitled to the same assets. It is now possible to do a UCC search and discover what assets a debtor may have liens placed against.

Once a UCC lien has been filed, the UCC financing statement ensures a creditor will be in the best possible position to get reimbursed for their loss. It is a way to obtain priority when it comes to the repossession of equipment, inventory and more. This is an important document that outlines what a creditor wants involving the default of a debtor.

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