Selected topic
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Bruce Nathan, Esq. and Eric Chafetz, Esq.
Mistakes in a UCC Financing
Statement’s Collateral
Description Can Be Hazardous
to a Perfected Security Interest!
A trade creditor dealing with a financially distressed
customer may seek a security interest in its customer’s
property to increase the likelihood of payment of the
creditor’s claim. One of the requirements for obtaining
a valid security interest with priority over future security interests and liens in the same collateral is for the
creditor to properly identify its collateral in both (i) the
security agreement executed by its customer, and, just
as importantly, (ii) the publicly filed Uniform Commercial Code (UCC) financing statement.
The recent holding of the United States Court of Appeals
for the Sixth Circuit, in 1st Source Bank vs. Wilson Bank
& Trust, et al., is a reminder of the unintended and harsh
consequences of inco