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Here you can find the answers for many of your Frequently Asked Questions. The majority of these questions have come from people like you looking to learn more about the type of work they do. If you don’t find your answers here, email us for assistance and we will be sure to add it to the list.
The Uniform Commercial Code is a set of suggested laws, which are divided into nine articles all relating to commercial law. Article 9, now Revised Article 9 (RA9), is the section of the code in which a security interest (aka UCC filing) may be created to protect a creditor’s rights if a debtor defaults on their obligation. The Code is a notification system by creditors showing an interest in a debtor’s property (collateral). The Financing statement or UCC is filed informing the public of this interest. UCC filings also help determine which creditor can collect first from a defaulting debtor.
A financing statement is a legal document that is filed to give notice that it has or may have an interest in the personal property of a Debtor. The UCC itself protects the Creditor/ Secured Party in the event the Debtor defaults on the agreement. Filing a UCC-1 prioritizes the order in which Secured Parties are paid in the event of a financial crisis of the Debtor; i.e. Bankruptcy.
According to RA9 of the Uniform Commercial Code, it states as of June 1, 2006 all filings should be filed within the state of incorporation/formation for companies and state of residency for individuals.
There are 3 types of UCC filings: UCC-1, UCC-3 and UCC-5.
A UCC-1 is the first UCC filing to occur is called the Financing Statement. It provides the Debtor, Secured Party and any collateral information. UCC1s are filed by Secured Parties (i.e. lenders) against Debtors (i.e. companies or individuals) once a loan agreement has been executed. They are effective for 5 years, after which they are considered to be lapsed. A filing is no longer effective once it has lapsed.
An amendment is a UCC filing which makes a change to the initial filing (i.e. change of address, collateral….). Can also be used to assign, continue, or terminate information from the initial filing. Amendments encompass any changes to the initial financing statement. A Party Information Change amends the name and/or address, adds a name or deletes a name of either a Debtor or Secured Party. A Collateral change can add, change or delete the collateral information.
A full release is a filing which releases the entire security interest in the collateral.
A partial release is a filing that releases a specific piece of collateral secured in an original financing statement.
A termination is a filing which denotes the ending of both parties’ obligations under the initial financing statement. The initial financing statement is still active even filing a termination until it lapses.
An assignment is a UCC filing that transfers property rights (real or personal) from one secured party to another. Assignments can be full or partial. Assignments can be full or partial; meaning either part or all of the property right is transferred.
A continuation is a filing that continues the original financing statement for an additional period of time. If a Debtor has not satisfied its obligation to the Secured Party, then the Secured Party can file a continuation of the original Financing Statement for another 5 years. This can be done every 5 years until the underlying obligation is paid.
A UCC-5 is a statement that an error occurred: records an inaccuracy, or wrongfully filed document, or filed by person not entitled to do so. It is not and does not amend any information, so still have to file a UCC3 if need to amend.
Goods which start out as personal property and are integrated into or affixed to realty and cannot be removed without damage to the real property. Fixture filings are generally filed at the county level in the states involved. The filing protects the creditor/secured party in the event the debtor defaults on the agreement. The filing prioritizes the order in which secured parties are paid in the event of a financial crisis of the debtor; i.e. bankruptcy.
Collateral is security given for the fulfillment of a debt (the real or personal property subject to a security interest).
A UCC search is a search of the public record in a location designated by the filing location of the debtor. Based on RA9 they would be filed at the state level making them searchable at the state level. Results would include any UCC1s, UCC3s and UCC5s.
A lien search includes various items such as: UCC/Fixture filings, Tax Liens (state or federal), Judgments, and Pending Suits. Lien searches are mainly conducted at the county levels since they are specific in nature not only for type, but place. For example, a judgment is a final decision of a court that determines and states the settlement so it would be at the county level where the court is located.
A federal search would include bankruptcy, United States District Court or United States Court of Appeals. In addition, bankruptcy searches may be performed to obtain certain information on court proceedings. Other court dockets are searched to see if a company or individual is a party to a suit. This is particularly important if someone wants to borrow money. A lender does not want to loan money to someone who may have an outstanding or expected judgment that would supersede their own claim.
Article 9 was revised in 1998 and again in 2010 to modify existing statutes regarding filing issues, including how to index individual persons who are debtors in a secured transaction. Among the amendments to RA9 are provisions for more guidance when listing a debtor name on a financing statement.
Lack of clarity for names of individuals has been a major issue in both UCC searching and filing. Who knows what the exact legal name for an individual debtor on a UCC financing statement? If a debtor’s name is “Joseph A. Smith”, filings may be made under “Joe Smith”, “Joseph Smith” or “Joseph A. Smith”. Yet to have perfection, names need to be exact and consistent.
The 2010 revisions seek to clarify this issue. Two alternatives are possible. The first, Alternative A, is called the “only-if” rule, requiring a filer provide on the financing statement the name on the debtor’s driver’s license, if the license has not expired. If the debtor does not have a driver’s license, the filer must use either the individual name of the debtor or the debtor’s surname and first personal name.
The second option, Alternative B, also known as the “safe harbor” rule, leaves intact the requirement that the financing statement use the debtor’s “individual name,” but provides that the name on the driver’s license will also be sufficient as well as the debtor’s surname and first personal name. If a state issues from the same office as a driver’s license is issued, a non-driver’s identification card, and it is not possible for the same individual to hold both a driver’s license and a non-driver’s identification card, the name provided on the non-driver’s identification card may be used with the same effect as a driver’s license name under either alternative.
States have been adopting either alternative and some states have adopted neither option, so there will still be no nationwide uniformity as to the indexing of individual names on financing statements!
For business entities, the revisions state that the proper name for perfection purposes is the corporate name filed with the state and provided on the organization’s charter.
To find out more; click here to read the UCC Article 9 Amendments (2010) Summary posted on the Uniform Law Commission website.
A UCC filing error once on the public record can only be altered by filing and amendment. If needed, an Information Statement can be filed notating the error then an amendment can be filed.
It is considered best practice not to include personal information such as a Social Security Number on a filing.
UCCs are effective for five years then, if not continued, they are considered lapsed. Once UCC filings have lapsed, states will still accept subsequent amendments. Their responsibility is merely to make sure the filing being submitted has the required information. If the status of a filing is unknown, perform a UCC search before filing.
Even though UCC filing forms have been standardized nationally, some jurisdictions have peculiar requirements, including such things as the use of a specific font size when preparing the document or making the Optional Filer Reference information mandatory on a UCC3.
The search date or thru date is the date for which a jurisdiction is current with posting filings to the public record. Please note: it may not be the current date. Every jurisdiction will provide a “thru date” stating when the search information is good through based on the date filings are caught up to (not normally the search date). Some jurisdictions are within 24-48 hours while others could be a week or more out.
A Search to Reflect is a search done once a UCC filing is completed and the search date has passed ensuring the filing information was captured properly on the public record.
Searches are not standardized across the nation. Search logic can vary depending on what a particular jurisdiction provides. For example, in Alabama searches at the state level will yield any UCCs, federal tax liens, and state tax liens while in Alaska a state level search yields only UCCs.
Noise words are words like “a,” “the,” or “and” are commonly dismissed as part of the search request. However, each jurisdiction has its own set of rules and requirements for search logic. Check with your Client Services Rep when you place your order for specifics about the jurisdiction(s) you are searching.
County searches usually take 3-5 business days, but can be longer if information needs to be redacted. Expediting is not usually an option at the county level.
A federal tax lien is a statutory lien which exists in favor of the US Government (usually the IRS) for failure on behalf of the debtor to pay a tax which is due to the government, usually the Internal Revenue Service.
A state tax lien is a lien filed in favor of the state or some state agency for failure to pay tax assessed on real or personal property.
There is no central database which can search every state and every county for information. Each jurisdiction would have to be searched separately.
Searches are conducted on exact names. A request for John Smith will not include John Anderson Smith or John G. Smith. Since the names are completely different they will produce separate results.
Searches can be done with or without copies. Without copies would be considered a listing only in which all active/open filings are reported in a clear concise manner. Many state levels provide certified listings, but counties do not. Federal level searches can produce docketing statements showing activity.
Searches are generally performed on debtor names. Not all jurisdictions allow for searches to be done by secured party name.