Wiley CPAexcel Exam Review 2014 Focus Notes: Regulation

Module 29: Secured Transactions

SECURED TRANSACTIONS

An agreement where a creditor receives additional assurance of repayment from a debtor who provides collateral in which the creditor obtains an interest

Collateral

The personal property that is subject to the creditor's security interest

Types of Collateral

Goods

• Consumer goods are goods for personal use
• Equipment is goods used for business
• Inventory is goods used for resale

Indispensible paper

Intangibles

Security Agreement

The agreement between the debtor and creditor that gives the creditor a security interest in the debtor's collateral

Requirements for a valid security agreement

• In writing, except when creditor has physical possession of collateral
• Signed by the debtor
• A description of the collateral

Attachment and Perfection

Attachment

Gives secured creditor right to collateral upon default of debtor

Conditions for attachment—all three must be met

• Creditor gives value to debtor
• Debtor has rights in the property
• Creditor takes possession of property or obtains written security agreement

A security interest attaches to collateral and the creditor grips the debtor's property.

Perfection

Gives secured creditor a claim to the property that is superior to others

Perfection occurs when the secured interest has attached and one of the following:

• A financing statement has been filed
• A purchase money security interest (PMSI) is perfected automatically when it attaches in a consumer sale
• The creditor has taken possession of ...