Tipping the Scales: The Great Escape
If you are a secured lender, then you know to file a UCC financing statement to perfect your security interest in the collateral, whether or not it is tangible (such as equipment) or intangible (such as accounts or leases). You also know enough to maintain an internal reminder file to let you know when the original filing has been on record for four years and six months, so that you can file a continuation statement before five years have elapsed and the original statement is no longer valid.
You know that filing a continuation statement is crucial, because if the statement lapses on the fifth anniversary of its filing, then you no longer have a perfected security interest in the collateral. Absent particular circumstances, any secured creditor who filed its UCC later than yours will have priority over your lien on the collateral. Plus, any new creditor who timely files its financing statement will have priority over your lien on the same collateral. This typically is what happens if you let a filing lapse.
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“Tipping the Scales: The Great Escape,” by Stephen T. Whelan was published in the March/April 2019 edition of Monitor Daily. Reprinted with permission.