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Proceeds

Proceeds. Defined. What the debtor receives upon the sale, exchange, collection, or other disposition of collateral (or proceeds of collateral). Defined. May include property in which the creditor could not obtain a security interest originally such as: Cash

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Proceeds

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  1. Proceeds

  2. Defined • What the debtor receives upon the sale, exchange, collection, or other disposition of collateral (or proceeds of collateral).

  3. Defined • May include property in which the creditor could not obtain a security interest originally such as: • Cash • Insurance proceeds on damaged, destroyed, or stolen collateral.

  4. Obtaining security interest in proceeds • Creditor’s security interest automatically continues in proceeds. • The security agreement does not need to mention proceeds.

  5. Problems • Problem 367 – p. 991 • Problem 368 – p. 995

  6. Perfection in Proceeds • Automatically perfected for 20 days. • Three methods to continue perfection beyond these 20 days:

  7. Perfection in Proceeds • 1. Same Office • Original security interest perfected by filing and a financing statement covering the proceeds would be filed in the same place as the original collateral.

  8. Perfection in Proceeds • 2. Identifiable cash proceeds

  9. Perfection in Proceeds • 3. Proceeds perfected within the 20 day period: • Creditor may or may not need to take affirmative action to achieve this perfection.

  10. Problems • Problem 369 – p. 996 • Chattel paper financier prevails over creditor with interest in chattel paper as proceeds. • Problem 370 – p. 996 • Tracing • Problem 371 – p. 1006 • “Double Debtor” issue

  11. Problems • Problem 372 – p. 1006 • Problem 373 – p. 1007

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