Basic Uniform Commercial Code


Secured credit is when credit is given, but a security interest is given in return via a security agreement.

Security Interest

A security interest is an interest in collateral, allowing them to be repossessed if the borrower defaults.


Collateral is property in which an interest is taken by the lender in a secured transaction or by an agricultural lien.

Collateral is divided into specialty sui generis property and the two basic other categories:

A security interest will remain attached to the collateral through anything unless something specially removes it. UCC § 9-201(a).

  • It will even remain perfected.
  • If a security interest is removed, it is removed for good. Future holders are also sheltered from the security interest.
    • Although if someone attached buys it back, it will still reattach.
  1. Except as otherwise provided in subsection (e), a buyer in ordinary course of business, . . . takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.
  2. Except as otherwise provided in subsection (e), a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
    1. without knowledge of the security interest;
    2. for value;
    3. primarily for the buyer's personal, family, or household purposes; and
    4. before the filing of a financing statement covering the goods.
Copyright, The American Law Institute
Buyer in Ordinary Course of Business

"Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.

Copyright, The American Law Institute
Financing Statement

A financing statement is a record that is publicly filed to put other people on notice of a security interest in the collateral.

A financing statement does not have to be very specific.

A financing statement does not have to be signed.

Security Interest Analyzing Framework

A retained interest creates a security interest. UCC § 2-401.

It attaches when value is given, the debtor has rights to the collateral, and something from UCC § 9-203(b)(3) occurs. UCC § 9-203.

Secured parties can collect the collateral via self-help or via sheriff.


A secured creditor has a right to go take property from his debtor as long as his doing so would not breach the peace. UCC § 9-609.

  • Bringing a police officer along does not make it not a breach of the peace. It is actually evidence that you did expect it to be a breach of the peace, and the uniform probably makes it a breach of the peace. To use the police, repossess it by judicial process, not self-help.
  • If someone tells you to leave, you have to leave. To do otherwise would be to breach the peace.
  • Lying and trickery is fine.

A creditor has a limited license to enter his debtor's property to enter property and retrieve the collateral, even cutting chains to do so. You cannot enter someone's dwelling house and probably not their fenced backyard however.

Courts are mainly concerned about preventing violence.

Secured transactions are much easier to collect upon as it does not require a lawsuit to collect.

Secured parties get higher priority than unsecured parties.