Lesson 13: Filing a Financing Statement

In this lesson, we will explore the process of filing a financing statement, an essential step in the perfection of security interests. Filing a financing statement is crucial for establishing the priority of a secured party's interest in the collateral.

For an in-depth guide, check out Secured Transactions: Examples & Explanations by James Brook.

What is a Financing Statement?

A financing statement, also known as a UCC-1 form, is a document filed to give public notice of a secured party's interest in the collateral of the debtor. The key purpose is to perfect the security interest, making it enforceable against third parties.

UCC Financing Statement

Key Elements of a Financing Statement

The financing statement must include the following key elements:

  • Debtor's Name: The legal name of the debtor.
  • Secured Party's Name: The name of the secured party or their representative.
  • Collateral Description: A description of the collateral covered by the security interest.

Steps to File a Financing Statement

  1. Complete the financing statement form (UCC-1).
  2. Submit the form to the appropriate filing office (typically the Secretary of State).
  3. Pay the filing fee.

The following diagram illustrates the process of filing a financing statement:

%%{ init: { "theme": "default" } }%% graph TD A["Complete UCC-1 Form"] --> B["Submit to Filing Office"] B --> C["Pay Filing Fee"] C --> D["Receive Acknowledgment"]

Need more insights? Read Secured Transactions Under the Uniform Commercial Code by Lawrence R. Ahern III.

Common Issues and Best Practices

When filing a financing statement, it is essential to avoid common pitfalls:

  • Incorrect Debtor Name: Ensure the debtor's name matches their legal documentation. This is particularly important for organizations.
  • Insufficient Collateral Description: Clearly describe the collateral. Avoid overly broad or vague descriptions.

For more detailed information, you can refer to our lessons on Description of Collateral and Requirements for Attachment.

Priority of Security Interests

Filing a financing statement establishes the priority of the secured party's interest over subsequent creditors. The priority rules can be complex, as illustrated:

%%{ init: { "theme": "default" } }%% graph LR A["Secured Party A - Files First"] -- Priority --> B["Collateral"] C["Secured Party B - Files Later"] -- Subordinate --> B

For a comprehensive guide on priority rules, see Mastering Secured Transactions by Richard H. Nowka.

Understanding the priority rules is crucial for secured parties to protect their interests. For more information, see General Priority Rules under UCC Article 9.

Conclusion

Filing a financing statement is a fundamental step in securing a party's interest in collateral. By ensuring the accuracy of the information and following best practices, secured parties can protect their interests effectively. For further reading on secured transactions, explore our other lessons.

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