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Secured Creditors Beware of Your Descriptions, Nomenclature and Terminations
Secured creditors can learn a great deal from a few recent bankruptcy cases involving the Uniform Commercial Code that remind us that the “devil is in the details.” These cases show that it is unrealistic to expect forgiveness by a court after a misstep involving Article 9 of the Uniform Commercial Code (UCC). Once a debtor files bankruptcy, Bankruptcy Code Section 544(a), also known as the “strong arm clause,” provides the trustee or the debtor the rights of a creditor with a judicial lien on the property of the debtor as of the date of the bankruptcy petition. See, Legislative History, Section 544(a).
The consequences of failing to be properly perfected can mean that the trustee or debtor in a bankruptcy case can convert the incorrectly perfected secured claim into a general unsecured claim. Knowing and abiding by the precise terms of Article 9 in your jurisdiction can make a huge difference in the treatment of a claim in a bankruptcy case.
Did You Adequately Describe All the Collateral?
As one bank learned recently, it is a huge mistake to diligently describe your collateral in your security agreement, leave that detailed description out of your financing statement, and then fail to attach the security agreement containing the description to your filed UCC-1.
In First Midwest Bank v. Reinbold (In Re: 180 Equip., LLC), 2018 Bankr. LEXIS 2482, (Bankr. C.D. Ill., Aug. 18, 2018), Midwest Bank made a pre-petition commercial loan to 180 Equipment, LLC and then filed a financing statement that contained no description of the collateral. The underlying security agreement between the bank and 180 Equipment, which refurbished bucket trucks, granted a security interest to the bank in 26 specifically identified categories of collateral. The collateral included accounts, chattel paper, equipment, general intangibles, goods, instruments and intangibles and all products and proceeds therefrom. 180 Equipment owned no real estate, so the security interest covered substantially all its assets.
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Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
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