Proceeds

Defined

What the debtor receives upon the sale, exchange, collection, or other disposition of collateral (or proceeds of collateral).

Defined

May include property in which the creditor could not obtain a security interest originally such as:

Cash Insurance proceeds on damaged,

destroyed, or stolen collateral.

Obtaining security interest in proceeds

Creditor’s security interest automatically continues in proceeds.

The security agreement does not need to mention proceeds.

Problems

Problem 367 – p. 991

Problem 368 – p. 995

Perfection in Proceeds

Automatically perfected for 20 days.

Three methods to continue perfection beyond these 20 days:

Perfection in Proceeds

1. Same Office

Original security interest perfected by filing and a financing statement covering the proceeds would be filed in the same place as the original collateral.

Perfection in Proceeds

2. Identifiable cash proceeds

Perfection in Proceeds

3. Proceeds perfected within the 20 day period:

Creditor may or may not need to take affirmative action to achieve this perfection.

Problems

Problem 369 – p. 996 Chattel paper financier prevails

over creditor with interest in chattel paper as proceeds.

Problem 370 – p. 996 Tracing

Problem 371 – p. 1006 “Double Debtor” issue

Problems

Problem 372 – p. 1006

Problem 373 – p. 1007