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Becoming a secured creditor.(Credit Basics)
Any creditor, including a trade creditor, can become a secured creditor. Secured creditors enjoy an advantage over unsecured creditors in the event that a customer files for bankruptcy protection--and even in cases in which the customer is delinquent. Why? Because in the event of default or bankruptcy, the secured creditor is entitled to "foreclose" on the assets pledged as collateral, or in the alternative a secured creditor is entitled to receive something of equal value.
The process of becoming a secured creditor is complex. Errors in "perfecting" a security interest result in improper filings. An improper filing can result in a creditor having only the illusion of security. A creditor must "perfect" its security interest to make it enforceable against third parties. Perfection is done by filing, often with the Secretary of State. Some of the most common errors creditors make in trying to perfect a security interest include:
* Failing to list the debtor's business name--and instead filing under their d.b.a.
* Having significant discrepancies between the financing statement and the underlying security agreement (contract)
* Failing to file with the correct state or local government entity or entities
* Using generic descriptions of collateral, such as "all assets." Instead, creditors should be more specific and use collateral descriptions commonly found in UCC financing statements.
* Failing to provide an adequate description of the collateral the debtor has pledged
- Tales of WHOA! Purchase money secured creditor must identify the proceeds from...
- Magazine article from: The RMA Journal Weissman, Michael L. April 1, 2006 700+ words
...2005) held that a purchase money secured creditor had to identify the proceeds from...Diest perfected a purchase money security interest. Hennings did not segregate its...of credit to Hennings secured by a security interest in Hennings' accounts receivable...
- Woodroast Systems, Inc. Ceases Operations, Surrenders Assets to Secured...
- Press release article from: PR Newswire September 21, 1998 700+ words
...surrendered all of its assets to a secured creditor and ceased all operations...following a demand by the secured creditor for repayment of its loan...loan. The creditor has a security interest in all of the assets of the...
- Secured creditor not liable for allegedly aiding and abetting a fraud.(Whoa)
- Magazine article from: The RMA Journal Weissman, Michael L. December 1, 2007 700+ words
...Anthony's receivables and a first security interest in St. Anthony's future receivables...intangibles, and all other assets. The security interest was perfected by the filing of UCC...and was granted a first-priority security interest on all of St. Anthony #2's assets...
- eStation Network Services, Inc. Announces Intent Of Secured Creditor To...
- News wire article from: Canadian Corporate News April 15, 2004 700+ words
...pursuant to the Bankruptcy and Insolvency Act. The obligations of eStation under the Trust Indenture are secured by a security interest over all of its assets and are guaranteed by its subsidiary, E-Cash Services Inc. ("E-Cash"). No demand has...
- Cash Collateral Usage Not Conditioned on Benefit to Secured Creditor.
- News wire article from: Mondaq Business Briefing December 16, 2004 700+ words
...quid pro quo for suspending a secured creditor's ability to enforce its...adequate protection" of a secured creditor's interest in collateral...concept designed to ensure that a secured creditor's interest does not diminish...
- Secured creditor's ability to enforce security - Individual Voluntary...
- News wire article from: Mondaq Business Briefing June 26, 2006 700+ words
...held to be ineffective to prevent a secured creditor from enforcing its security. In this...creditor, it would not preclude a secured creditor from enforcing its security. It was...whether or not such enforcement by the secured creditor required the involvement of the court...
- Pudgie's Chicken, Inc. Announces Approval of Agreement With Secured Creditor
- Press release article from: PR Newswire February 21, 1997 700+ words
...agreement among Pudgie's, its secured creditor and its Official Creditors...Pursuant to the Agreement, the secured creditor agreed to vote in favor of...reorganization that pays the secured creditor $1 million on account of...
- New World Reports Settlement Agreement with Manhattan Bagel Secured Creditor...
- Press release article from: PR Newswire November 12, 1998 700+ words
...Inc.'s (Nasdaq: BGLSQ) secured creditor to resolve all open issues and to ensure support by the secured creditor for the confirmation of the Debtor...Bagel Company, Inc. and the secured creditor, First Union National Bank...