assignment of ucc financing statement

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What is a UCC financing statement and how to make sure it is bulletproof

21 July 2023

Table Of Contents

Contributors.

Filing a UCC financing statement is an important step in protecting one's rights to collateral and is often a critical element of business transactions. Knowing the ins-and-outs of filing a UCC financing statement is essential for ensuring that it is bulletproof, and AnyLawyer's suite of legal-tech tools make this process much easier and faster.

In this blog post, we will explore what a UCC financing statement is, list the type of filings associated with it, and describe how to file and search for a UCC financing statement.

The Uniform Commercial Code

The Uniform Commercial Code (UCC) is a set of laws that govern commercial transactions and contracts. Originally drafted in 1952, the UCC was adopted by all 50 states as a uniform set of laws governing business-related matters. This means that commercial contracts are enforced in the same way across the US. The UCC financing statement is one element of the UCC.

What is a UCC financing statement?

A UCC financing statement - also known as a UCC-1 financing statement or a UCC-1 filing - is a legal document that states that the filer has an interest in a particular asset or piece of collateral. It notifies anyone who searches public records that this asset is already encumbered, and provides legal protection for the holder of the security interest. Should the debtor default on the loan, the creditor might be able to seize the collateral.

The lien can be against a specific collateral, or it can take the form of a blanket lien, which applies to all of the debtor's business assets. Depending on the type of lien, different types of UCC-1 filings may be required.

What are the legal consequences of a UCC-1 filing?

By filing a UCC financing statement, the creditor notifies other potential creditors that they have an interest in the collateral. The filing creates an order in which assets can be seized, in the case of a defaulted loan or declared bankruptcy. Additionally, if the same asset is used as collateral in another loan, the first lender will be prioritized: the second lender will not be able to recover the asset unless the original lender is satisfied.

Types of UCC-1 filings

There are two types of UCC-1 filings: UCC liens against a specific collateral and UCC blanket liens. A UCC lien against a specific collateral is registered with the state and identifies the actual asset that is being used as collateral. This type of filing protects the creditor in cases where multiple assets are being used as collateral, such as when a vehicle is bought with an auto loan but secured by other personal property owned by the borrower.

Specific collateral can come in the form of movable objects, such as cars, boats, and jewelry, but it can also include investment securities, receivables, and intellectual property.

A UCC blanket lien provides protection against all the debtor's business assets, regardless of type or location. It is often used when a large number of assets are involved, such as in the case of corporate loans taken by small business owners that put their entire business up as collateral. If the borrower defaults, the creditor has the right of recovery on all assets, up to the value of the debt.

This type of filing protects lenders from the event that a specific asset is damaged, destroyed, or otherwise loses value. However, a blanket lien offers little protection for borrowers, as the creditor is granted access to all of their assets and could potentially put them out of business.

How to file a UCC financing statement

Filing a UCC financing statement must include the following information:

• Personal information of the borrower: the filing must establish whether the debtor is an organization or an individual. In the case of registered organizations, the name of the debtor must match the organization's name in the public record. In the case of an individual, their name in the filing should match their name on an unexpired driver's license in their state of residence. Some states, e.g. Delaware, offer a "safe harbor" option, which makes multiple names for an individual acceptable, such as a name under which they own property.
• Personal information of the lender or the lender's representative: multiple names can be listed if there is more than one lender.
• Description of the collateral: the description must reasonably identify the collateral. In the case of a blanket lien, an indication that the UCC financing statement covers all of the debtor's assets.

Where to file

Once all the necessary information has been prepared, it is easy enough to file the UCC financing statement with the appropriate secretary of state's office. This does not necessarily occur where the collateral is located, like in the past, but in the state in which either the borrowing organization is registered, or in which the individual borrower resides.

When to file

It is important to keep in mind that the order of filing has an impact on the outcome. A borrower can secure loans from more than one lender, and each lender has the right to file a UCC financing statement. The lender that was the first to file an accurate UCC-1 financing statement (to "perfect" their interest) is also the first to collect on the lien. Once they are satisfied, the lender that was second to file takes their turn to collect, and so on.

How to search for a UCC financing statement

Once a UCC financing statement has been filed, it becomes public record. It can be found using the secretary of state's website, for the state in which the UCC-1 filing was filed. Commercial UCC search engines can be used to simplify the process.

The name of the debtor used for the search must be exact, as results can be affected by small differences:

• & vs "and",
• a singular form vs a plural form of a name,
• typos or extra spaces,
• numerals (1 instead of "one").

UCC financing statement FAQ

Q: can the debtor's personal property be the collateral indicated in a ucc-1 filing.

A: Yes, in most cases. However, the debtor must be identified correctly and the description of the collateral must be detailed enough for a reasonable person to identify it.

Q: Does a UCC-1 filing create an ownership interest in the collateral?

A: No, it does not create ownership or any other type of legal rights over an asset. It only creates a lien on the asset, giving the lender a security interest in it.

Q: How long does a UCC-1 filing remain active?

A: A UCC-1 financing statement is valid for five years from the date of filing. It can be renewed before expiration for another five-year period.

Q: Does a UCC-1 filing need to be registered in all states where the debtor has assets?

A: No, only the state in which either the borrowing organization is registered, or in which the individual borrower resides needs to be considered.

Q: Is a UCC filing required for all types of loans?

A: No. Some loan agreements do not involve collateral and thus do not require a UCC-1 filing.

Using AI tools to ensure a correct filing

Filing a UCC financing statement correctly is essential to protect creditors' interests and ensure that the filing stands up in court. However, it is easy to make mistakes when filling out such paperwork. Luckily, AI-based tools can help lenders avoid errors and omissions when filing UCC statements. These tools use natural language processing (NLP) to extract relevant information from documents and can fill in the form automatically, eliminating the risk of human error to ensure a bulletproof filing.

Enforcing security interest with the help of a UCC-1 filing

Filing a Uniform Commercial Code financing statement is an important step in protecting one's rights to collateral and is often a critical element of business transactions. By understanding what a UCC financing statement is and how to file one, lenders can ensure that they will be able to collect their secured interest in the case of a loan default or the debtor's bankruptcy. AnyLawyer's suite of legal-tech tools makes the process of filing a UCC financing statement much easier, faster, and more secure. With the help of AnyLawyer, lenders can be certain that their UCC financing statements will be well-crafted and properly filed.

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U.C.C. - ARTICLE 9 - SECURED TRANSACTIONS (2010)

Primary tabs.

• Part 1. General Provisions

[Subpart 1. Short Title, Definitions, and General Concepts]

• § 9-101 . SHORT TITLE.
• § 9-102 . DEFINITIONS AND INDEX OF DEFINITIONS.
• § 9-103 . PURCHASE-MONEY SECURITY INTEREST; APPLICATION OF PAYMENTS; BURDEN OF ESTABLISHING.
• § 9-104 . CONTROL OF DEPOSIT ACCOUNT.
• § 9-105 . CONTROL OF ELECTRONIC CHATTEL PAPER.
• § 9-106 . CONTROL OF INVESTMENT PROPERTY.
• § 9-107 . CONTROL OF LETTER-OF-CREDIT RIGHT.
• § 9-108 . SUFFICIENCY OF DESCRIPTION.

[Subpart 2. Applicability of Article]

• § 9-109 . SCOPE.
• § 9-110 . SECURITY INTERESTS ARISING UNDER ARTICLE 2 OR 2A.
• Part 2. Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement

[Subpart 1. Effectiveness and Attachment]

• § 9-201 . GENERAL EFFECTIVENESS OF SECURITY AGREEMENT.
• § 9-202 . TITLE TO COLLATERAL IMMATERIAL.
• § 9-203 . ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST; PROCEEDS; SUPPORTING OBLIGATIONS; FORMAL REQUISITES.
• § 9-204 . AFTER-ACQUIRED PROPERTY; FUTURE ADVANCES.
• § 9-205 . USE OR DISPOSITION OF COLLATERAL PERMISSIBLE.
• § 9-206 . SECURITY INTEREST ARISING IN PURCHASE OR DELIVERY OF FINANCIAL ASSET.

[Subpart 2. Rights and Duties]

• § 9-207 . RIGHTS AND DUTIES OF SECURED PARTY HAVING POSSESSION OR CONTROL OF COLLATERAL.
• § 9-208 . ADDITIONAL DUTIES OF SECURED PARTY HAVING CONTROL OF COLLATERAL.
• § 9-209 . DUTIES OF SECURED PARTY IF ACCOUNT DEBTOR HAS BEEN NOTIFIED OF ASSIGNMENT.
• § 9-210 . REQUEST FOR ACCOUNTING; REQUEST REGARDING LIST OF COLLATERAL OR STATEMENT OF ACCOUNT.
• Part 3. Perfection and Priority

[Subpart 1. Law Governing Perfection and Priority]

• § 9-301 . LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS.
• § 9-302 . LAW GOVERNING PERFECTION AND PRIORITY OF AGRICULTURAL LIENS.
• § 9-303 . LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN GOODS COVERED BY A CERTIFICATE OF TITLE.
• § 9-304 . LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN DEPOSIT ACCOUNTS.
• § 9-305 . LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY.
• § 9-306 . LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHTS.
• § 9-307 . LOCATION OF DEBTOR.
• § 9-308 . WHEN SECURITY INTEREST OR AGRICULTURAL LIEN IS PERFECTED; CONTINUITY OF PERFECTION.
• § 9-309 . SECURITY INTEREST PERFECTED UPON ATTACHMENT.
• § 9-310 . WHEN FILING REQUIRED TO PERFECT SECURITY INTEREST OR AGRICULTURAL LIEN; SECURITY INTERESTS AND AGRICULTURAL LIENS TO WHICH FILING PROVISIONS DO NOT APPLY.
• § 9-311 . PERFECTION OF SECURITY INTERESTS IN PROPERTY SUBJECT TO CERTAIN STATUTES, REGULATIONS, AND TREATIES.
• § 9-312 . PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER, DEPOSIT ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS, INSTRUMENTS, INVESTMENT PROPERTY, LETTER-OF-CREDIT RIGHTS, AND MONEY; PERFECTION BY PERMISSIVE FILING; TEMPORARY PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION.
• § 9-313 . WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY PERFECTS SECURITY INTEREST WITHOUT FILING.
• § 9-314 . PERFECTION BY CONTROL.
• § 9-315 . SECURED PARTY'S RIGHTS ON DISPOSITION OF COLLATERAL AND IN PROCEEDS.
• § 9-316 . CONTINUED PERFECTION OF SECURITY INTEREST FOLLOWING CHANGE IN GOVERNING LAW.

[Subpart 3. Priority]

• § 9-317 . INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE OF UNPERFECTED SECURITY INTEREST OR AGRICULTURAL LIEN.
• § 9-318 . NO INTEREST RETAINED IN RIGHT TO PAYMENT THAT IS SOLD; RIGHTS AND TITLE OF SELLER OF ACCOUNT OR CHATTEL PAPER WITH RESPECT TO CREDITORS AND PURCHASERS.
• § 9-319 . RIGHTS AND TITLE OF CONSIGNEE WITH RESPECT TO CREDITORS AND PURCHASERS.
• § 9-320 . BUYER OF GOODS.
• § 9-321 . LICENSEE OF GENERAL INTANGIBLE AND LESSEE OF GOODS IN ORDINARY COURSE OF BUSINESS.
• § 9-322 . PRIORITIES AMONG CONFLICTING SECURITY INTERESTS IN AND AGRICULTURAL LIENS ON SAME COLLATERAL.
• § 9-323 . FUTURE ADVANCES.
• § 9-324 . PRIORITY OF PURCHASE-MONEY SECURITY INTERESTS.
• § 9-325 . PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL.
• § 9-326 . PRIORITY OF SECURITY INTERESTS CREATED BY NEW DEBTOR.
• § 9-327 . PRIORITY OF SECURITY INTERESTS IN DEPOSIT ACCOUNT.
• § 9-328 . PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY.
• § 9-329 . PRIORITY OF SECURITY INTERESTS IN LETTER-OF-CREDIT RIGHT.
• § 9-330 . PRIORITY OF PURCHASER OF CHATTEL PAPER OR INSTRUMENT.
• § 9-331 . PRIORITY OF RIGHTS OF PURCHASERS OF INSTRUMENTS, DOCUMENTS, AND SECURITIES UNDER OTHER ARTICLES; PRIORITY OF INTERESTS IN FINANCIAL ASSETS AND SECURITY ENTITLEMENTS UNDER ARTICLE 8.
• § 9-332 . TRANSFER OF MONEY; TRANSFER OF FUNDS FROM DEPOSIT ACCOUNT.
• § 9-333 . PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW.
• § 9-334 . PRIORITY OF SECURITY INTERESTS IN FIXTURES AND CROPS.
• § 9-335 . ACCESSIONS.
• § 9-336 . COMMINGLED GOODS.
• § 9-337 . PRIORITY OF SECURITY INTERESTS IN GOODS COVERED BY CERTIFICATE OF TITLE.
• § 9-338 . PRIORITY OF SECURITY INTEREST OR AGRICULTURAL LIEN PERFECTED BY FILED FINANCING STATEMENT PROVIDING CERTAIN INCORRECT INFORMATION.
• § 9-339 . PRIORITY SUBJECT TO SUBORDINATION.

[Subpart 4. Rights of Bank]

• § 9-340 . EFFECTIVENESS OF RIGHT OF RECOUPMENT OR SET-OFF AGAINST DEPOSIT ACCOUNT.
• § 9-341 . BANK'S RIGHTS AND DUTIES WITH RESPECT TO DEPOSIT ACCOUNT.
• § 9-342 . BANK'S RIGHT TO REFUSE TO ENTER INTO OR DISCLOSE EXISTENCE OF CONTROL AGREEMENT.
• Part 4. Rights of Third Parties
• § 9-401 . ALIENABILITY OF DEBTOR'S RIGHTS.
• § 9-402 . SECURED PARTY NOT OBLIGATED ON CONTRACT OF DEBTOR OR IN TORT.
• § 9-403 . AGREEMENT NOT TO ASSERT DEFENSES AGAINST ASSIGNEE.
• § 9-404 . RIGHTS ACQUIRED BY ASSIGNEE; CLAIMS AND DEFENSES AGAINST ASSIGNEE.
• § 9-405 . MODIFICATION OF ASSIGNED CONTRACT.
• § 9-406 . DISCHARGE OF ACCOUNT DEBTOR; NOTIFICATION OF ASSIGNMENT; IDENTIFICATION AND PROOF OF ASSIGNMENT; RESTRICTIONS ON ASSIGNMENT OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, AND PROMISSORY NOTES INEFFECTIVE.
• § 9-407 . RESTRICTIONS ON CREATION OR ENFORCEMENT OF SECURITY INTEREST IN LEASEHOLD INTEREST OR IN LESSOR'S RESIDUAL INTEREST.
• § 9-408 . RESTRICTIONS ON ASSIGNMENT OF PROMISSORY NOTES, HEALTH-CARE-INSURANCE RECEIVABLES, AND CERTAIN GENERAL INTANGIBLES INEFFECTIVE.
• § 9-409 . RESTRICTIONS ON ASSIGNMENT OF LETTER-OF-CREDIT RIGHTS INEFFECTIVE.
• Part 5. Filing

[Subpart 1. Filing Office; Contents and Effectiveness of Financing Statement]

• § 9-501 . FILING OFFICE.
• § 9-502 . CONTENTS OF FINANCING STATEMENT; RECORD OF MORTGAGE AS FINANCING STATEMENT; TIME OF FILING FINANCING STATEMENT.
• § 9-503 . NAME OF DEBTOR AND SECURED PARTY.
• § 9-504 . INDICATION OF COLLATERAL.
• § 9-505 . FILING AND COMPLIANCE WITH OTHER STATUTES AND TREATIES FOR CONSIGNMENTS, LEASES, OTHER BAILMENTS, AND OTHER TRANSACTIONS.
• § 9-506 . EFFECT OF ERRORS OR OMISSIONS.
• § 9-507 . EFFECT OF CERTAIN EVENTS ON EFFECTIVENESS OF FINANCING STATEMENT.
• § 9-508 . EFFECTIVENESS OF FINANCING STATEMENT IF NEW DEBTOR BECOMES BOUND BY SECURITY AGREEMENT.
• § 9-509 . PERSONS ENTITLED TO FILE A RECORD.
• § 9-510 . EFFECTIVENESS OF FILED RECORD.
• § 9-511 . SECURED PARTY OF RECORD.
• § 9-512 . AMENDMENT OF FINANCING STATEMENT.
• § 9-513 . TERMINATION STATEMENT.
• § 9-514 . ASSIGNMENT OF POWERS OF SECURED PARTY OF RECORD.
• § 9-515 . DURATION AND EFFECTIVENESS OF FINANCING STATEMENT; EFFECT OF LAPSED FINANCING STATEMENT.
• § 9-516 . WHAT CONSTITUTES FILING; EFFECTIVENESS OF FILING.
• § 9-517 . EFFECT OF INDEXING ERRORS.
• § 9-518 . CLAIM CONCERNING INACCURATE OR WRONGFULLY FILED RECORD.

[Subpart 2. Duties and Operation of Filing Office]

• § 9-519 . NUMBERING, MAINTAINING, AND INDEXING RECORDS; COMMUNICATING INFORMATION PROVIDED IN RECORDS.
• § 9-520 . ACCEPTANCE AND REFUSAL TO ACCEPT RECORD.
• § 9-521 . UNIFORM FORM OF WRITTEN FINANCING STATEMENT AND AMENDMENT.
• § 9-522 . MAINTENANCE AND DESTRUCTION OF RECORDS.
• § 9-523 . INFORMATION FROM FILING OFFICE; SALE OR LICENSE OF RECORDS.
• § 9-524 . DELAY BY FILING OFFICE.
• § 9-525 . FEES.
• § 9-526 . FILING-OFFICE RULES.
• § 9-527 . DUTY TO REPORT.
• Part 6. Default

[Subpart 1. Default and Enforcement of Security Interest]

• § 9-601 . RIGHTS AFTER DEFAULT; JUDICIAL ENFORCEMENT; CONSIGNOR OR BUYER OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, OR PROMISSORY NOTES.
• § 9-602 . WAIVER AND VARIANCE OF RIGHTS AND DUTIES.
• § 9-603 . AGREEMENT ON STANDARDS CONCERNING RIGHTS AND DUTIES.
• § 9-604 . PROCEDURE IF SECURITY AGREEMENT COVERS REAL PROPERTY OR FIXTURES.
• § 9-605 . UNKNOWN DEBTOR OR SECONDARY OBLIGOR.
• § 9-606 . TIME OF DEFAULT FOR AGRICULTURAL LIEN.
• § 9-607 . COLLECTION AND ENFORCEMENT BY SECURED PARTY.
• § 9-608 . APPLICATION OF PROCEEDS OF COLLECTION OR ENFORCEMENT; LIABILITY FOR DEFICIENCY AND RIGHT TO SURPLUS.
• § 9-609 . SECURED PARTY'S RIGHT TO TAKE POSSESSION AFTER DEFAULT.
• § 9-610 . DISPOSITION OF COLLATERAL AFTER DEFAULT.
• § 9-611 . NOTIFICATION BEFORE DISPOSITION OF COLLATERAL.
• § 9-612 . TIMELINESS OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL.
• § 9-613 . CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL: GENERAL.
• § 9-614 . CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL: CONSUMER-GOODS TRANSACTION.
• § 9-615 . APPLICATION OF PROCEEDS OF DISPOSITION; LIABILITY FOR DEFICIENCY AND RIGHT TO SURPLUS.
• § 9-616 . EXPLANATION OF CALCULATION OF SURPLUS OR DEFICIENCY.
• § 9-617 . RIGHTS OF TRANSFEREE OF COLLATERAL.
• § 9-618 . RIGHTS AND DUTIES OF CERTAIN SECONDARY OBLIGORS.
• § 9-619 . TRANSFER OF RECORD OR LEGAL TITLE.
• § 9-620 . ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL SATISFACTION OF OBLIGATION; COMPULSORY DISPOSITION OF COLLATERAL.
• § 9-621 . NOTIFICATION OF PROPOSAL TO ACCEPT COLLATERAL.
• § 9-622 . EFFECT OF ACCEPTANCE OF COLLATERAL.
• § 9-623 . RIGHT TO REDEEM COLLATERAL.
• § 9-624 . WAIVER.

[Subpart 2. Noncompliance with Article]

• § 9-625 . REMEDIES FOR SECURED PARTY'S FAILURE TO COMPLY WITH ARTICLE.
• § 9-626 . ACTION IN WHICH DEFICIENCY OR SURPLUS IS IN ISSUE.
• § 9-627 . DETERMINATION OF WHETHER CONDUCT WAS COMMERCIALLY REASONABLE.
• § 9-628 . NONLIABILITY AND LIMITATION ON LIABILITY OF SECURED PARTY; LIABILITY OF SECONDARY OBLIGOR.
• Part 7. Transition
• § 9-701 . EFFECTIVE DATE.
• § 9-702 . SAVINGS CLAUSE.
• § 9-703 . SECURITY INTEREST PERFECTED BEFORE EFFECTIVE DATE.
• § 9-704 . SECURITY INTEREST UNPERFECTED BEFORE EFFECTIVE DATE.
• § 9-705 . EFFECTIVENESS OF ACTION TAKEN BEFORE EFFECTIVE DATE.
• § 9-706 . WHEN INITIAL FINANCING STATEMENT SUFFICES TO CONTINUE EFFECTIVENESS OF FINANCING STATEMENT.
• § 9-707 . AMENDMENT OF PRE-EFFECTIVE-DATE FINANCING STATEMENT.
• § 9-708 . PERSONS ENTITLED TO FILE INITIAL FINANCING STATEMENT OR CONTINUATION STATEMENT.
• § 9-709 . PRIORITY.
• Part 8. TRANSITION PROVISIONS FOR 2010 AMENDMENTS

UCC-3 Financing Statement | Practical Law

UCC-3 Financing Statement

Practical law glossary item 1-382-3886  (approx. 2 pages).

What Is a UCC Financing Statement?

Written by: Alison Wilkinson Legally Reviewed by: David Curle and Jennifer Tsai

March 23, 2021

6 minute read

The Uniform Commercial Code , or UCC, is a set of model rules that govern commercial transactions in the United States. Every state has adopted these model rules in substantially similar form, meaning that the terms of a commercial contract entered into in Connecticut is enforced in the same way as the terms of a commercial contract in Texas or any other state. The uniformity of application gives certainty to business relationships.

A UCC financing statement — also called a UCC-1 financing statement or a UCC-1 filing — is a legal form that allows a lender to announce a lien on an asset to secure a loan . By filing the UCC financing statement, the lender is giving notice that it has an interest in the property listed in the filing. This means that if the debtor defaults on the loan, the creditor can potentially receive the personal property of the debtor that was put up as collateral.

The filing of a UCC financial statement creates a hierarchy of which assets can be seized, and in what order, should the debtor default or declare bankruptcy. For instance, if a borrower takes out another loan from a second lender using the same assets as collateral, the second lender will not be permitted to recover the assets until the first lender is fully satisfied. Accordingly, UCC-1 filings are generally filed as soon as the loan is made.

Types of UCC-1 Filings

There are two types of liens that can arise under a UCC financing statement: liens against specific collateral and blanket liens.

UCC Liens Against Specific Collateral

A UCC lien against specific collateral gives creditors an interest in a specific asset or in specific assets of the borrower. A lender will generally seek specific collateral when loaning money for a specific asset; for instance, if the loan is for money to purchase a backhoe, the backhoe itself could be the specific collateral for the loan. Thus, the types of specific collateral are usually moveable, including items such as vehicles, office equipment, or inventory. However, the collateral can also include items such as receivables, investment securities, letters of credit, and other items of value.

UCC Blanket Liens

Rather than giving an entitlement to specific assets, a blanket lien gives lenders an interest in all of the borrower’s business assets. If the borrower defaults, the lender can seize the business assets up to the value of the debt, then sell the assets to repay the debt. Assets can include tangible items like real estate and equipment, as well as intangible items like intellectual property.

This type of lien is favored by lenders. With specific collateral, if the item is destroyed or has lost value, it may not cover the loan. However, with a blanket lien, the lender can recover multiple items up to the value of the loan, giving the lender protection that a specific lien cannot.

On the flip side, a blanket lien provides minimum protection to borrowers, who could potentially lose all of their pledged assets in the event of default. In effect, this could mean that the borrower would be put out of business if the loan is defaulted.

How to File a UCC Financing Statement

When to file.

The order in which UCC financing statements are filed dictates the order in which lenders can collect. The first lender to file is able to repossess the collateral listed up to the value of the loan. Only after, or if, that lender is satisfied can the second lender to file collect. For that reason, lenders are apt to file quickly so they can be first in line. This also means a second lender may be hesitant to issue a loan to a borrower. Accordingly, it is of utmost importance that lenders correctly file the UCC financing statement in a timely fashion.

Information Included in a UCC-1 Filing

The following information must be included in the UCC-1 filing in order to perfect the lien:

Personal and contact information for the borrower

The filing should indicate whether the debtor is an individual or an organization , along with basic information about the debtor organization if applicable. If the borrower is a registered organization, the name of the borrower must exactly match the name of that organization in the public record — for instance, in the company’s articles of incorporation filed with the Secretary of State.

For an individual, generally the name listed should match the name on that individual’s driver’s license, but only if the individual has an unexpired driver’s license in the state of principal residence. This is appropriately known as the “ only if ” requirement: Only if the name exactly matches the one on the driver’s license can the lien be perfected.

In some states, however, such as Delaware, there is a “ safe harbor ” option. Under the safe harbor option, multiple names for an individual may be accepted, including a name that differs from the one listed on the driver’s license. For instance, if the debtor’s driver’s license identifies the individual as Jonathan Sullivan III, but the person owns property under the name Jon Sullivan, the name Jon Sullivan may also be accepted.

Personal and contact information for the lender or the lender’s representative

In the event of multiple lenders, multiple lender names can be listed.

Description of the collateral covered in the UCC lien

UCC financing statements must include a reasonably identifiable description of the collateral or an indication that the financing statements cover all assets or personal property. A supergeneric description — such as “all of the debtor’s personal property” — is generally not sufficient to reasonably identify the collateral.

Failure to include all of this information about the borrower, lender, and collateral could result in the state rejecting the filing. If the debtor enters into loans with multiple lenders at or near the same time, and a lender’s UCC-1 filing is rejected, this can have drastic effects on that lender’s ability to collect the loan in the event of default. The first lender to “perfect” its interest in the property, which means it has its UCC filing filed and accepted, will have priority in collecting on the loan, regardless of whether it was the first lender approached by the borrower.

Where to File the UCC-1 Filing

In the past, UCC filings could be made where the collateral was located. However, recent changes to the UCC provide that the location of the collateral no longer determines where to file.

Instead, filings are generally made with the secretary of state’s office in the state where either:

• The debtor organization is registered
• The individual debtor resides

Uncovering All Relevant Records

Once the UCC filing is perfected, it becomes public record. Accordingly, people can search the relevant databases to uncover whether there is a UCC lien against any given debtor. They can also search the secretary of state’s website in the state where the debtor resides or is incorporated for the exact name of the debtor. Commercial UCC search engines have similar search functions.

It is important to stress that during a search, the name of the debtor must be exact. In the case of an organization, the name can be confirmed by looking up the organization’s articles of incorporation on the secretary of state’s website. For an individual, it is best practice to try several variations of the name to ensure that the search delivers all relevant results, especially in a safe harbor jurisdiction.

A full understanding of the rules around filing UCC financing statements, and of the ramifications if the statements are filed incorrectly, is a key component to securing and collecting on commercial loans. Kira’s technology includes smart fields that are optimized for use on UCC financing statements, which allows users to uncover relevant information from their UCC financing searches.

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What Is a UCC-1 Statement?

Understanding ucc-1 statements, types of ucc-1 statements.

• UCC Filing Effect on Credit Scores

Example of a UCC-1 Statement

What are the benefits after filing a ucc-uniform commercial code-1 (ucc-1) statement, how do you remove a ucc filing, how long does a ucc filing last, what is a continuation statement, the bottom line.

• Corporate Finance
• Corporate Debt

UCC-1 Statement: Definition, Types, and Example

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Dennis Madamba / Investopedia

A UCC-Uniform Commercial Code-1 statement is a legal notice filed by creditors to publicly declare their rights to potentially obtain the personal properties of debtors who default on business loans they extend. Often abbreviated as UCC-1, these notices are typically printed in local newspapers to alert the masses of the creditors’ intentions.

UCC-1s are required for all business loans under the Uniform Commercial Code (UCC) and establish a relative priority over which specific assets may be seized, and in what order, while solidifying the collection pecking order in cases where there are multiple lenders to the same debtor.

Key Takeaways

• A UCC-Uniform Commercial Code-1 (UCC-1) statement is a legal notice filed by creditors in an effort to publicly declare their right to seize assets of debtors who default on loans.
• UCC-1 notices are typically printed in local newspapers, in an effort to publicly express a lender’s intent to seize collateralized assets. 
• These forms are mainly used to smooth out collection processes, often by helping lenders secure court orders authorizing them to seize assets from delinquent borrowers.
• These forms must be filed with agencies located in the state where the borrower’s business is incorporated.
• There are two types of UCC-1 statements: blanket liens, and liens attached to specific collateral.

The UCC-1 statement serves as a lien on secured collateral , where the components and filing procedures are comparable to the lien requirements in residential mortgage loan contracts. The UCC-1 statement is a directive of the Uniform Commercial Code (UCC), which governs business deals and activities in the United States.

According to the ninth article of the UCC, titled “Secured Transactions,” a lender must incorporate completed UCC-1 statements in a business loan’s contract for it to be deemed effective. The statements must include detailed information about the borrower, and they must itemize descriptions of all assets named as the secured collateral for the loan. While virtually any type of asset may serve as such collateral, the most commonly used items include real estate properties, motor vehicles, manufacturing equipment, inventory, and investment securities such as stock and bond holdings.

As with any ordinary lien, lenders must perfect the UCC-1 statement by filing it with the appropriate agency in the state where the debtor company is incorporated. In most cases, UCC-1 statements are filed with the secretary of state’s office, which subsequently time-stamps the document and assigns a file number to the associated parties.

In industry jargon, the process of issuing UCC-1 notices is referred to as “perfecting the security interest” in the debtor’s property.

Lenders have the option of filing the following two types of UCC-1 statements:

• Specific collateral UCC-1 statements . These are most commonly used in real estate or equipment transactions. They give lenders first-order secured rights to real estate properties or specific collateral such as the equipment purchased with the loaned funds.
• Blanket lien . This gives the lender secured rights to a range of assets, as long as the terms of these liens are detailed in the collateral section of the UCC-1 statement. Lenders tend to prefer blanket or “all-asset” liens.

How a UCC Filing Affects Credit Scores

Like individuals, most businesses have a credit report and score . While a UCC lien will appear on a business’ credit report, it won’t necessarily have an immediate negative impact on the business’ credit score, unless the business should default on the underlying loan.

The loan attached to the UCC filing will also increase a business’ credit utilization ratio , which, if it gets too high, can negatively impact the score. Furthermore, the business won’t be able to use the same piece of property as collateral for a different loan if there is a lien attached to it.

Say a construction company named Alex’s Excavation applies for a business loan to purchase two new hydraulic excavators. Bank XYZ is interested in offering Alex a loan, and as part of the contract, it files a UCC-1. Shortly afterward, Alex’s Excavation loses one of its biggest construction contracts, and then another, and the company is forced to file for bankruptcy .

Because the company had several lenders, it’s likely that Bank XYZ would not be given first-order rights to Alex’s property and would have to wait until all other lenders were paid. However, because the bank filed a specific collateral lien on the two excavators, it received the property/cash mentioned in the UCC-1 statement in a timely fashion.

Filing a UCC-1 statement allows creditors to collateralize or “secure” their loan by utilizing the personal property assets of their customers. In the event of a customer defaulting on their loan or filing for bankruptcy, a UCC-1 elevates the lender’s status to a secured creditor, ensuring that it will be paid.

While rules vary by state, there are essentially two ways to remove a UCC lien:

• The first is to ask the lender to immediately remove the lien upon full payment of the loan by filing a UCC-3 statement.
• The other option, if your lender fails to file a UCC-3 after you’ve paid off the loan, is to visit your local secretary of state’s office and swear under oath that you have fulfilled the debt in full and request to have the UCC-1 removed.

A UCC-1 statement is effective for five years. After this five-year period, the lien becomes null and void.

A continuation statement is an amendment attached to a UCC-1 financing statement. Continuation statements extend the lender’s lien on the borrower’s collateral past the original financing statement’s expiration date. When a lender files a continuation statement, the continuation statement extends the UCC-1 financing statement by five years from the date of filing.

UCC filings let creditors notify other creditors about a debtor’s assets that are used as collateral for a secured transaction. UCC liens filed with the appropriate secretary of state’s offices serve as public notice of the creditor’s interest in the assets. To check for UCC filings, visit your secretary of state’s website.

National Association of Secretaries of State. “ UCC Filings .”

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Ucc assignment and federal uspto assignment: one word, two meanings.

Fairly frequently, I am asked the following question:

“Do assignment filings made with the USPTO have the same effect as assignment filings made under Article 9 of the Uniform Commercial Code?”

While in certain situations the answer is yes, the more helpful and short answer is no . UCC assignments are typically filed centrally or locally in each state, IP filings are made at the federal level. Moreover, the word ‘assignment’ may have a different meaning. 

I’ll explore some of the similarities and differences between Article 9 assignments and assignments made with the U.S. Patent and Trademark Office (USPTO) to explain why.

What is an Assignment?

Let's start with setting the scope of what we mean by the term ‘assignment’. When used with respect to property, particularly in the legal world, assignment is defined as “the act of transferring an interest in property or some right (such as contract benefits) to another”.

UCC Assignment

Article 9 of the  Uniform Commercial Code (UCC)  allows a secured party (SP) to file assignments via UCC3 amendments. In the UCC Article 9 world, an assignment (UCC3) is linked to the initial financing statement (UCC1) in the public record so that the relationship between the two filings is clear. Both filings, the UCC1 and UCC3, are indexed together so that a search of the public record by a debtor name will reveal both the financing statement and the amendment in one search.

There are several types of UCC assignment filings a secured party may make with the appropriate central filing office and/or local filing office: 

• The secured party (assignor) may assign all of its rights to another party (assignee). (This is considered a full assignment.)
• The secured party may assign the rights to some portion or percentage of all the collateral covered by the initial UCC financing statement to another party. (A partial assignment.)
• The secured party may assign the rights of the 100% interest in a  portion  of the collateral to another party. (Also a partial assignment.)

USPTO Assignment

Like the rights to security interests that may be fully or partially assigned under the UCC,  intellectual property (IP) , such as patents and trademarks, may also have ownership rights transferred in full or in part on the public record at the USPTO. In both cases, when an IP or UCC assignment filing is made, the filings end up in the public record so that searchers can find them.

At the USPTO, however, assignments and other changes are not directly linked on one index when searching by name, which is ordinarily how due diligence searching is conducted. A name search of the USPTO index will not yield one set of complete results containing both trademark applications and registrations and all trademark assignment filings. Separate searches are needed in different sections of the USPTO website. Once those searches are completed, a searcher may need to manually review the results in order to determine if there is a parent-child relationship between the records.

This is also important to note because an IP assignment can be filed before a patent is granted or a trademark application and registration appears on the USPTO records, because it might still be going through the review process at the USPTO.

On top of that, some filings categorized as ‘assignments’ at the USPTO, because they are indexed in the assignments database, are not assignments by definition. In other words,  a filing on the USPTO assignment database may NOT be transferring rights in full or in part . This means that search results will include actual assignments and other records that are not assignments in the true sense of the rights of transfer. 

USPTO Assignment Recordation Examples

So, what other filings are included as ‘assignments’ at the USPTO that are not really assignments? As an example, let’s say that the owner of IP changes their name while retaining ownership in their IP. Searching either of the assignment indexes at the USPTO may include name change results. Technically, this is not an assignment by definition – there was no transfer of rights – but the name change is filed on the assignment index. A security interest in IP is another example of a type of lien filing found on the USPTO assignments database but is not, by definition, an assignment.

Adding to the confusion, IP filers can choose to file using the option of ‘Other’ and can enter a conveyance type not already provided as a standard selection, which means that almost anything can be included on the ‘assignment’ records at the USPTO. 

A Rule of Thumb for UCC and IP Assignments

The main point to take away from this discussion is that while assignments of UCCs are always assignments, assignments of IP are not as clear. Assignments of UCCs are always linked to the initial financing statements and are usually reflected in a single search, but assignments of IP filings are found on a different USPTO database from the trademark application and registration database, and patent grant and published pending patent databases, which all require separate searches (and thus, yield separate search results) on the USPTO website. It is necessary for the searcher to match up IP assignments to the parent record, if there is a parent record available.

The terminology may appear the same, but the meaning – and the search processes – for USPTO assignments and UCC assignments are completely different.

For insight on how intellectual property due diligence dovetails with more traditional types of searches, access our free webinar below:

This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Article 9 Filing, Searching and Due Diligence , UCC , Intellectual Property Due Diligence

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Ucc & corporate due diligence resource guide for legal and financial professionals, 5 types of ucc3 change statements.

It’s an amendment filing to an original UCC1 financing statement that changes or adds information to the originally filed UCC1. It’s a filing tool secured parties use to manage their UCC portfolio to maintain their perfected security interests.

Importantly, • the timing of UCC3 recording execution • the accuracy of the data changes or additions • and choosing the correct amendment type can all be critical to maintaining a perfected security interest and the original UCC1 priority position.

Before discussing what a UCC3 is, its various types and how they are utilized, a quick review of UCC1s is in order. UCC1 financing statements are recorded filings which give notice to other creditors of a security interest in specific collateral used to secure debt. They are typically recorded to perfect the security interests of a secured party to prioritize their claim position in the event of a debtor default. UCC1s are subject to the effects of subsequently filed documents, whether those documents attach to the original filing, like a UCC3, or not, like a Federal tax lien.

Some of these subsequently filed documents can prime a perfected security interest, like Federal tax liens.

Others, like UCC3s if not executed according to statute, can cause a secured party to lose effectiveness of their lien, their UCC1, and all claims on any collateral should there be a default.

It’s that last piece that is vitally important about UCC3s: they can affect previously perfected security interests depending on when and where they are recorded, what they do, and how accurate the new data is.

What are the Different Types of UCC3s?

There are five different types of UCC3s.

• Continuations – extends the financing statement effectiveness for another five years;
• Party Amendments – adds or amends debtor or secured party information, such as changes to the legal name or the address
• Collateral Amendments – adds or removes collateral from the collateral description, or restates the collateral description completely
• Assignments – transfers “full” or “partial” rights in the filing from one secured party to another
• Terminations – extinguishes a financing statement prior to its five-year lapse date

Where and how are UCC3s recorded?

UCC3s are recorded in the same jurisdiction as the effective UCC1 it amends. A step by step process on how to execute a UCC3 filing can be found here .

What are some examples of the critical nature of each UCC3 type?

• Continuations – there is a 6 month window prior to the UCC1 5-year lapse date in which a Continuation must be recorded for it to be effective; Continuations are not effective if recorded after the lapse date and the UCC1 lapses and becomes ineffective
• Party Amendments – these amendments often coincide with name changes and/or address changes to business entity documents of the parties involved; these name changes and address changes typically require amendments to the original UCC1 identifying these changes within a specific time frame; address changes that involve a change of state have specific UCC3 filing protocols for secured parties to follow within specific time frames
• Collateral Amendments – partial releases are executed as a DELETE collateral descriptions, a critical aspect of this type of UCC3; a collateral restatement  is a replacement of a prior collateral description, not an addition to that prior description, so a secured party’s security interest in any collateral that is not fully restated in the UCC3 collateral amendment risks becoming unperfected
• Assignments – sometimes a new UCC1 is required instead of an assignment, depending, and failure to recognize what is required in a situation can result in a secured party’s lien becoming ineffective
• Terminations – other parties can terminate a UCC1 besides the secured party; also, RA9 requires no signatures to record terminations; a termination can be recorded by the debtor under certain circumstances; monitoring services are available which alert secured parties to when another party files a termination on one of their UCCs; contact the secured party to verify the effectiveness of a recorded termination.

Once a UCC1 is recorded and a security interest is perfected, a secured party’s focus shifts to maintaining that perfected security interest and managing the UCC1 going forward until it either lapses or is terminated.

UCC3s are a tool which secured parties use to manage that process.

Another important conversation about UCC3s are common mistakes that are made regarding them. Use the button below to download our Free Reference Guide: Top 3 Mistakes on UCC3 Change Statement .

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