Basic Uniform Commercial Code
- "Lien creditor" means:
Copyright, The American Law Institute
People with statutory liens are not lien creditors. They have to be judgment liens.
Just getting a judgment does not make you a lien creditor. Even getting a write of execution does not in most states. You usually have to have the sheriff go out and take the property.
Tax liens do not make the IRS a lien creditor.
Lien creditors take free of security interest if they become a lien creditor when the lien is not perfected. UCC § 9-317(a)(2)(A).
- This can lead to a circular lien situation, where a secured party files a perfected interest, then someone becomes a lien creditor (which the secured creditor has priority over), then the secured party's perfection lapses, and another person becomes a lien creditor, having priority over the secured party. Then SP1 > LC1 > LC2 > SP1 > LC1 and so on.
- This can sometimes apply if even if the security interest has not actually attached if the debtor gives rights to the collateral and something from UCC § 9-203 happens. Value does not have to be given. It actually just matters when the financing statement is filed. UCC § 9-317.
People become lien creditors at the time of the levy. That is also the the priority date.