Legal News for Credit Union Managers Since 1990
« Non-Fatal Clerical Error On Credit Union Lien
Credit Union Deemed Holder in Due Course on Endorsed Check »
18
Dec
2020

Uniform Commercial Code (UCC) – Early Continuation – Statement Extinquishes Lien

The Uniform Commercial Code(UCC), under which most States operate, dictates that the filing of a financing statement by a creditor is effective for only five years from the date the statement was filed.

Thereafter, the debt becomes unsecured. In the event the creditor desires to extend its security interest, the creditor must file a “continuation statement” within six months prior to expiration of the five year period from the original date of filing.

Here, the bank intended to extend its security interest past the five year period prescribed by the UCC. The creditor, however, filed its continuation statement prior to the six month period preceding the end of the five year period.

The debtor argued to the Court that the creditor’s premature filing of the continuation statement was ineffective and did not properly extend the creditor’s interest in the collateral.

The Court agreed with the debtor and held that the creditor must file its continuation statement within the six month period immediately preceding expiration of the five year period.

Here, the early filing effectively extinquished the security.  Rainbow Manufacturing Company v. Bank of Fitzgerald, (U.S. Bkrtcy. M.D. Ga., Nos. 91-50236 & 91-5054).

Author: Charles R. Harroun, Attorney at Law



This entry was posted on Friday, December 18th, 2020 at 8:43 am and is filed under Employees, Secured Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Your comment

Powered by WP Hashcash

  • Recently Posted Articles written by: Charels R. Harroun, Attorney at Law

    • Statement of Financial Affairs: Discharge Denied
    • Holder in Due Course – Checks
    • Reasonable Reliance on Debtor’s Loan Application
    • $100,000.00 Award to Employee
    • Chapter 13 Bankruptcy Home Equity Mortgage Modifications
    • Substantial Abuse: Bankruptcy Dismissed
    • Sale of Credit Union Collateral: “AS IS”
    • Mobile Home Lien Superior to Real Estate Mortgage
    • Deposit Set-Off Not Allowed
    • Credit Union Board-Member Suit Dismissed
    • Collateral: Embezzled Funds

  • Website Builder

2009-2020 Copyright Harroun, P.C. | Credit Union Legal Newsletter powered by WordPress and Uchilla
Subscribe: Entries (RSS) and Comments (RSS)