Creditors looking to protect against collection risk can seek a security interest in their customer’s personal property. However, the grant of a security interest alone isn’t enough when it comes to the debtor’s personal property—the creditor must also perfect its security interest by filing a UCC-1 financing statement. Article 9 of the Uniform Commercial Code (“UCC”) prescribes the form and manner—and place—for filing a UCC-1 financing statement.
As illustrated by the Ninth Circuit Bankruptcy Appellate Panel’s recent decision in Global One Media, Inc., location is key when it comes to filing UCC-1 financing statements. A creditor seeking to perfect its security interest in a debtor’s assets located in two different states filed UCC-1 financing statements in those states, instead of in the debtor’s state of incorporation. The result? The Ninth Circuit Bankruptcy Appellate Panel held that the creditor’s security interest in the debtors’ personal property was unperfected and, therefore, unenforceable. The Global One Media, Inc. decision highlights how important it is for a creditor seeking secured status to strictly adhere to the requirements of UCC Article 9 and file its UCC-1 financing statement in the right place.
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