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The Basics of the UCC Process [DATE] Webinar

Join our webinar to learn about the Uniform Commercial Code, UCC filings, secured transactions, and the benefits they offer in bankruptcies and repossessions. Discover how to protect your business and ensure payment for goods and services.

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The Basics of the UCC Process [DATE] Webinar

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  1. The Basics of The UCC Process [DATE] For Webinar Technical Assistance, please call NCS at 800-826-5256 Our presentation will begin shortly.

  2. Agenda • Uniform Commercial Code and Revised Article 9 • Blanket UCC-1 Filings • Priority in UCC Filings • Purchase Money Security Interest • Benefits in Chapter 7 Bankruptcies • Inventory vs. Equipment • Repossession • Security Agreement • Financing Statement

  3. Collateral Property pledged as a guarantee of payment for an obligation or loan. Personal Property

  4. Proven Strategies

  5. The Value of Money • The cost of write-offs

  6. The Uniform Commercial Code Article 1: General Provisions Article 2: Sales Article 2A: Leases Article 3: Negotiable Instruments Article 4: Bank Deposits and Collections Article 4A: Funds Transfers Article 5: Letters of Credit Article 6: Bulk Transfers Article 7: Warehouse Receipts, Bills of Lading Article 8:Investment Securities Article 9: Secured Transactions

  7. Personal Property Security Act The same protections are available under Canada’s PPSA.

  8. The Expanding Code • Canada • Mexico • Puerto Rico • Australia • New Zealand

  9. Article 9 Revisions • 2001 & 2013 JULY

  10. Secured Transactions The Best Possible Position to Get Paid If your customer (the debtor) goes out of business (defaults) before the goods or services you provided are paid for, you are in the best possible position of getting back some of the goods or some of the money due.

  11. Benefits of Secured Transactions • Secured creditor status in a Chapter 7 • Right of Repossession (PMI) • Part of the secured creditor team in a Chapter 11 • Generally protected from preferential payment suits • Public record of debt in case business is sold • Public record of ownership of assets

  12. Why is There Not a Greater Use of UCC Filings?

  13. Two Types of UCC Filings Blanket, or Basic Purchase Money Security Interest

  14. Blanket, or Basic, UCC-1 Filing • The filing covers all assets • The priority stacks Two Characteristics:

  15. Who Has Application for a Blanket UCC-1? Those creditors who are: • Providing financing only • Providing services only • Providing materials, inventory, equipment or goodsthat are quickly used up or resold by the debtor

  16. Who Has Application for a Blanket UCC-1? Those creditors who are: • Providing financing only • Providing services only • Providing materials, inventory, equipment or goodsthat are quickly used up or resold by the debtor • Structuring notes

  17. Promissory Note

  18. Debtor: $61,000 Unsecured Creditors

  19. Chapter 7

  20. First in time, first in right Debtor: $61,000 $55,000 Unsecured Creditors split what’s left over

  21. First in time, first in right Debtor: $61,000 $55,000 100 unsecured creditors Each is owed $1000 $60 each is actually paid

  22. First in time, first in right Debtor: $61,000 $55,000 100 unsecured creditors 6 cents on the dollar

  23. Priority in UCC Filings Claims are paid based on where they are situated on the claims priority ladder. Secured Creditors Administrative Priority Claims Lower-Level Priority Claims Pre-petition Unsecured Creditors

  24. Purchase Money Security Interest Two Characteristics: • Creditor finances goods • There is value in repossessing those goods

  25. Who Has Application for a PMSI Filing? Those creditors who are: • Selling to stocking wholesalers. • Selling to stocking resellers. • Selling on a consignmentbasis where title passes while inventory is still in the debtor’s possession. • Selling inventory or equipment.

  26. Inventory vs. Equipment It depends on what your customer does with the goods you sell to them.

  27. Inventory vs. Equipment Is your customer resellingor using your products in their business?

  28. PMSI: The Value of Repossession • Resale • Differentiating your receivables

  29. Debtor: $61,000 Unsecured Creditors

  30. Debtor: $61,000 Your Inventory: $5,000 Unsecured Creditors

  31. Chapter 7

  32. Debtor: $66,000 Your Inventory: $5,000 Unsecured Creditors

  33. First in time, first in right Debtor: $56,000 Your Inventory: $5,000 Unsecured Creditors

  34. First in time, first in right Debtor: $61,000 Your Inventory: $5,000 Unsecured Creditors $0

  35. Objections Do you really think there is going to be any inventory left to repossess in a Chapter 7?

  36. Objections Come on, I ran a credit report, there are 15 previously secured creditors. What’s the value in being 16th?

  37. Chapter 11 Debtor: $56,000 Unsecured Creditors $0

  38. Two Required Elements • Security Agreement • Financing Statement or UCC-1

  39. Security Agreement • Creates the secured interest • Spells out terms and conditions

  40. Security Agreement • Can be a stand-alone document or exist in other forms • Loan agreement • Sales agreement • Consignment agreement • Promissory note • Conditional sales contract • Dealer agreement • Or….

  41. Credit • Application • Security • Agreement

  42. Financing Statement • Records the secured interest and makes it a public record • In effect for five years, at which time can be continued for another five-year period • Filed in locations based on your customer’s form of business

  43. Three Goals of a Collateral Description

  44. Sample Collateral Description All inventory / goods manufactured by or distributed by Secured Party, whenever sold or consigned, to or for the benefit of Debtor by Secured Party, wherever located, now owned and hereafter acquired including but not limited to...; and all proceeds from the sale thereof; and all existing or subsequently arising, accounts, and all accounts receivable which may from time to time hereafter come into existence during the term of this Security Agreement

  45. Review of Topics Covered • UCC filings provide a way to have collateral pledged against open credit lines • Trade creditors have the same opportunities as banks to have this collateral pledged • UCC filings can provide you protection in the event that your customer defaults or files bankruptcy

  46. Review of Topics Covered • They also can provide you protection from preferential payment claims • A position “in line” can be taken on intangible assets and priority in tangible assets, such as inventory or equipment, can be established • The secured interests are created through a security agreement and made a public record via a financing statement or UCC-1.

  47. Questions & Answers

  48. Thank you for your time! • Visit us online: www.ncscredit.com • Jerry Bailey:jbailey@ncscredit.com • Call us: 800-826-5256 ext. 177

  49. Education & Resources Don’t miss our upcoming webinars! View the schedule at: www.ncscredit.com/education NCS webinars are available OnDemand. Contact us to learn more. View NCS Extra Credit videos on our YouTube channel: http://www.youtube.com/user/NCSCredit Follow us on Facebook, Twitter, YouTube, LinkedIn, and Instagram

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