Struggles for perfection and the priority of various security interests rarely take place between the secured creditor and the debtor. It is more likely that these conflicts between creditors will lead to who is the first priority of the debtor`s property. To enhance a security interest, a creditor must ensure that he has properly informed the rest of the world that a security interest is being invoked in the property. A creditor must have a security contract with the debtor in order to have a valid security interest. The security agreement must: a bankruptcy puts an end to all legal action against the debtor. Often, there is bankruptcy when many sellers start pushing a debtor legally. Every time you take legal action against the debtor, you run the risk that a bankruptcy will prevent you from obtaining guarantees or that all of the debtor`s assets will have disappeared until the end. Obtaining a safety interest avoids both problems. As long as the debtor can do so 90 days after granting a security interest without filing for bankruptcy, your security interests will survive bankruptcy, while other creditors may not be able to withdraw.

In your security agreement, you want the right to contact the debtor`s client in order to obtain a direct payment. The security agreement in the annexes contains these and other safeguards. A fundamental understanding of secured and unsecured debt is essential to measuring the magnitude and process of a security agreement. Many individuals and organizations assume both types of debt, but in different contexts. Keep in mind that you may need to take possession of shares, bonds or tradable instruments to protect an effective security interest in them. [11] Secured creditors generally have the same rights as an unsecured creditor and also have the first claim on the property. A second creditor may sue the debtor, who is not known to the secured creditor. The second creditor could obtain a judgment against the debtor and annex it to all of the debtor`s assets, including the securities assets. Even if the secured creditor has not brought an appeal against the debtor and has not yet obtained a judgment, he or she still has the first right to the guarantee.

If the second creditor takes ownership of the debtor in a court sale, the secured creditor receives the entire proceeds of the guarantee up to the loan amount. A secured creditor is therefore not too preoccupied with the „race to the courthouse“. A variety of methods can be used to achieve perfection in a security contract. Real estate owned by the debtor or associated investor is often the best candidate for the interest of securities. Real estate security interests are not the responsibility of the UCC, but other state laws. As a result, they are not discussed in this project, but remember the security interests in real estate as a possibility. The security agreement in the annexes examines real estate. The law on property security varies from state to state. Caution is required and the assistance of a lawyer is probably necessary. These three elements are imperative requirements of a proper security agreement, without which the creditor may have no valid and enforceable security interest in the ownership of the property that is subject to the agreement.