A security interest is only as good as the steps behind it. A lender that misses one, by filing in the wrong state, describing the collateral too narrowly, or failing to take control of a deposit account, can find itself unsecured against a bankruptcy trustee or behind a competing creditor. Borrowers have their own stake in getting the documents right, since overbroad liens and negative pledges can block future financing. We handle secured lending for lenders, borrowers, and investors, with particular depth in intellectual property collateral, where state commercial law and federal registration systems overlap in ways that catch many lenders off guard.
Attachment And Perfection
Under UCC Article 9, a security interest attaches when value has been given, the debtor has rights in the collateral, and the debtor has authenticated a security agreement describing the collateral, or the secured party has possession or control. Attachment makes the interest enforceable against the debtor. Perfection makes it effective against third parties, including a bankruptcy trustee using the strong-arm power under Section 544 of the Bankruptcy Code. Most collateral is perfected by filing a UCC-1 financing statement in the state where the debtor is located, which for a corporation or LLC is its state of organization under Section 9-307. Errors in the debtor's exact legal name can make a filing seriously misleading and ineffective.
Control And Special Collateral
Some collateral cannot be perfected by filing, or is better perfected another way. A security interest in a deposit account as original collateral can be perfected only by control, usually through a three-party deposit account control agreement with the bank under Section 9-104. Investment property is best perfected by control under Section 9-106, which gives priority over a lender that merely filed. Letter-of-credit rights, electronic chattel paper, and, in states that have adopted the 2022 UCC amendments, controllable electronic records such as certain digital assets have their own control rules. Motor vehicles and other titled goods are perfected through the certificate-of-title system. We map each category of a borrower's assets to the right method before closing.
Intellectual Property As Collateral
IP collateral splits between state and federal systems. Courts have held that a security interest in a registered copyright must be recorded with the Copyright Office to be perfected, while unregistered copyrights are perfected by a UCC filing. For patents and trademarks, a UCC-1 filing perfects the security interest, but the Patent Act protects later purchasers and mortgagees who record with the USPTO first, so careful lenders record there as well. Trademark collateral must include the associated goodwill, and an intent-to-use application generally cannot be assigned before use begins, which affects how lenders foreclose. We prepare security agreements and short-form IP security agreements for recording, run the searches, and fix chain-of-title gaps before they matter.
Priority And Enforcement Disputes
Priority fights usually come down to dates and methods: the first-to-file-or-perfect rule in Section 9-322, the superpriority of a purchase-money security interest under Section 9-324, a lender with control over a deposit account against a lender that only filed, or a buyer in the ordinary course who takes free of the lien. After default, a secured party may repossess without breach of the peace under Section 9-609 and dispose of the collateral, but every aspect of the disposition must be commercially reasonable under Section 9-610, with proper notice to the debtor and guarantors. A defective sale can limit or eliminate a deficiency claim. We bring and defend these claims, along with preference and lien avoidance challenges in bankruptcy.
Common Collateral Mistakes
The recurring problems are simple and avoidable. Lenders file against a trade name instead of the debtor's registered legal name, let a financing statement lapse after its five-year term without a continuation, or forget to file in the new state after a borrower reincorporates. Collateral descriptions in the security agreement say less than the financing statement, or leave out the IP the deal was really about. Borrowers sign blanket liens that include license rights their own licensors prohibit them from pledging, putting the license at risk. We audit existing liens before new financings, track continuation and relocation deadlines, and keep IP recordations current as patents issue and new copyright registrations are obtained.
