John, the secured party, perfects his security interest by filing a financing st

Question

John, the secured party, perfects his security interest by filing a financing statement. What is the effect of perfection of John’s security interest?

a.         The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.

b.         The security interest becomes enforceable against the debtor.

c.         The debtor is protected against all other parties who acquire an interest in the collateral after the filing.

d.         The assets subject to the security interest are treated as intangible personal property.

Explanation / Answer

a.         The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.

Perfection: The process by which secured parties protect their security interests in collateral against the claims of third parties who may look to the same collateral to satisfy the debtor’s obligations to them.

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