Enforcing Security Interests

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What Is a Security Interest?

A security interest is an interest in property that secures the performance of an obligation by one party to another, such as the payment of a debt.

Security interests can be granted in nearly any type of property, including presently owned or even after-acquired property.

How to Create a Security Interest

A security interest is usually created by a written agreement. The agreement generally requires:

  1. Explicit language: Words expressly granting or creating the interest.
  2. Authentication: The party granting the interest must authenticate the agreement, usually by signing.
  3. Description of the Collateral: The agreement must describe the collateral, either by specifically identifying it, describing its category, or otherwise reasonably identifying it. Whether a description is sufficient depends in part on the type of collateral being encumbered. The statement, “all the debtor’s property,” is usually not sufficient.

Making Security Interests Enforceable

A security interest is enforceable when it "attaches" to the collateral. Attachment occurs when:

How to Enforce the Security Agreement

If the debtor defaults, the secured creditor may:

What about Third Parties?

Third parties may have an interest in the collateral. If so, "perfection" determines the secured creditor’s rights with respect to third parties.

How to Perfect a Security Interest

Different types of collateral have different requirements for perfection. In general, a security interest is perfected when (1) it attaches and (2) one or more of the following occurs:

Who Has Priority?

The general rules for priority are:

Should I Seek an Experienced Attorney?

Whether you would like to enter a security agreement or need to enforce your agreement, an experienced business lawyer or real estate lawyer can aid you in protecting or exercising your property rights.

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Last Modified: 05-27-2014 04:02 PM PDT

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