Why Do I Need to File a UCC-1?

B&BTake a moment for “Bits & Bytes,” as Attorney Deanne Koll explains why it is important for a lender to properly and timely file a UCC-1.

Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.

A UCC-1, sometimes referred to as a financing statement, is a document filed by a creditor to put all other parties on notice that the creditor has a secured interest in certain personal property. The UCC-1 is akin to a real estate mortgage, but for personal property.

With real estate, the way a third party knows that a creditor must be paid before he or she takes the real estate free and clear is by reviewing the real estate records and seeing if there are outstanding mortgages.

The same is true for personal property. The UCC-1 is filed to “perfect” a creditor’s security interest by putting the public on notice of the creditor’s lien. The UCC-1 tells third parties that the creditor has a right to take possession of and sell certain assets for repayment of a specific debt.

Lastly, the filing of a UCC-1 establishes a creditor’s priority. Just as a 1st mortgage holds priority over later recorded mortgages, a UCC-1 filed 1st on certain personal property holds priority over later filed UCC-1s on the same property.

Clearly it is important for a lender to properly and timely file a UCC-1 when a lender takes personal property as collateral for its loan.

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