Priority Rules of Secured Transactions

Lesson: Priority Rules of Secured Transactions

In this lesson, sift through the intricacies of secured transactions with Nick Palazzolo, CPA, as he demystifies the priority rules that establish who gets paid first when a debtor defaults. Ponder over the precedence of perfected security interests versus unperfected ones, and understand how a purchase money security interest (PMSI) can disrupt the usual pecking order. Grasp the concept of a buyer in ordinary business and their rights against secured interests, and dive into the implications for lien creditors and unsecured creditors. To cement this knowledge, Nick walks through real-world scenarios, illustrating how these rules play out in bankruptcy proceedings and when multiple creditors lay claim to the same assets. Discover the significance of timely perfection and filing, and prepare to tackle these concepts with confidence on exam day.

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Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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We've got some priority rules in secure transactions. Now the priority rules of secure transactions, these determine the order in which creditors have the right to claim and collect from a debtor's collateral in the event of default. These rules are going to be essential for resolving conflicts among multiple creditors who have competing claims on the same collateral. These priority rules in secure transactions are mainly governed by Article 9 of the UCC in these big old beautiful United States. All right, here are our priority rules. We are looking at them. First up, we've got perfected security interests have priority over unperfected security interests. A creditor with a perfected security interest, which is a security interest that has been properly documented and filed, has priority over a creditor with an unperfected security interest in the same collateral. Next up, we've got the first to file or first to perfect rule among creditors with perfected security interests. Priority is typically determined by the order in which their interests were perfected. This is usually based on the date of filing a financing statement or taking possession or control of the collateral. The first creditor to perfect their security interest has the highest priority here. Next up, the PMSI. Now a PMSI, security interest in collateral that is created when a creditor enables the debtor to acquire the collateral by extending credit. In the case of goods other than inventory or livestock, a PMSI has priority over other security interests in the same collateral if it is perfected within 20 days after the debtor receives possession of the goods. Now, in the case of inventory, the PMSI creditor must perfect their interest before the debtor takes possession and notify any other secured parties with a conflicting interest. Next up is the

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Bankruptcy, Debtors & Creditors, and Secured Transactions

Module: 3 Concepts, 46 Videos

Secured Transactions, Including the Rights, Duties and Liabilities of Debtors, Creditors and Guarantors Overview

2:55

Introduction to Secured Transactions

5:24

Debtors, Creditors, and Guarantors

3:10