Confused about UCC sale definition - does disposing of collateral count?
I'm dealing with a situation where our borrower wants to sell some equipment that's covered under our UCC-1 filing. The loan officer keeps talking about "UCC sale" but I can't find a clear definition anywhere. Does this mean we need to file a UCC-3 amendment first? Or is this something different entirely? The equipment is worth about $85k and we're trying to figure out if we need to release our security interest before they can sell it to a third party. Has anyone dealt with this before? I don't want to mess up our lien position but also don't want to hold up a legitimate business transaction.
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Logan Stewart
A UCC sale typically refers to when secured collateral is sold either by the debtor with lender consent or by the secured party after default. If your borrower is selling with your permission, you'd usually need to provide a release or partial release depending on your loan agreement terms.
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Diego Castillo
•So we definitely need to do something with our UCC filing then? The loan agreement says they need our written consent for equipment sales over $50k.
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Mikayla Brown
•Yeah, you'll likely need to file a UCC-3 partial release for that specific equipment once the sale goes through and you get paid.
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Sean Matthews
Been through this exact scenario multiple times. The term "UCC sale" can be confusing because it's not an official UCC form or filing type. It usually just means a sale of collateral that's subject to a UCC security interest. Your next steps depend on whether this is an authorized sale or a foreclosure sale.
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Diego Castillo
•It's definitely authorized - they asked permission first. So we need to release our interest in that specific equipment?
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Sean Matthews
•Exactly. You'll want to file a UCC-3 amendment with the termination box checked for just that equipment, or use a partial release if your state allows it.
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Ali Anderson
•Make sure you get paid first though! Don't release the lien until the sale proceeds hit your account.
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Zadie Patel
I had a similar situation last month and ended up using Certana.ai to verify all my UCC documents before processing the release. You can upload your original UCC-1 and the UCC-3 amendment you're planning to file - it instantly checks that everything matches up correctly. Saved me from filing a termination with the wrong debtor name format.
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Diego Castillo
•That sounds helpful - I'm always paranoid about getting the debtor name exactly right on amendments.
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Zadie Patel
•Yeah, it's super easy. Just upload your PDFs and it cross-checks everything automatically. Caught a collateral description mismatch I would have missed.
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A Man D Mortal
Wait, are you sure you need to release anything? If it's equipment that's being replaced with similar equipment of equal value, you might be able to keep your security interest under the proceeds doctrine.
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Diego Castillo
•Hmm, they're not replacing it with anything - just selling to raise cash for operations.
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Logan Stewart
•In that case, you'll definitely want to release your interest in the equipment once you're satisfied with the sale terms.
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A Man D Mortal
•Right, if it's not replacement collateral then you need to decide if you want to take the proceeds or release entirely.
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Declan Ramirez
UGH the terminology around this stuff drives me CRAZY. Why can't they just call it "selling collateral" instead of "UCC sale"? Makes it sound like there's some special type of sale process when really it's just regular business with lien considerations.
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Emma Morales
•I know right? Every bank seems to use different terms for the same thing.
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Declan Ramirez
•Exactly! And then you get conflicting advice from different departments about what paperwork you need.
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Sean Matthews
•It's because the UCC itself doesn't define "UCC sale" - it's just industry jargon that stuck.
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Katherine Hunter
Just went through this process and honestly the hardest part was coordinating the timing. You want to file the UCC-3 release right after the sale closes but before the buyer tries to get clean title. Had to file a same-day amendment to avoid any title issues.
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Diego Castillo
•Good point about timing. The buyer is probably going to want proof that our lien is released.
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Katherine Hunter
•Exactly, and if you wait too long to file the amendment it can hold up their financing or registration.
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Lucas Parker
Make sure you check your loan docs carefully. Some agreements require the borrower to use sale proceeds to pay down the loan balance, others let them keep the cash as long as they maintain minimum collateral coverage.
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Diego Castillo
•Good catch - I need to double-check what our loan agreement says about proceeds.
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Donna Cline
•Yeah, this is super important. We've had deals where the borrower thought they could pocket the proceeds but the loan docs required paydown.
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Lucas Parker
•Exactly! Always read the fine print on disposal of collateral clauses.
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Harper Collins
One thing to watch out for - if this equipment was specifically described in your UCC-1 collateral description, you'll need to be careful about how you handle the partial release. Some states are picky about matching the original description exactly.
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Diego Castillo
•It's listed as "equipment" generally, not the specific serial numbers. Does that make it easier?
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Harper Collins
•Yeah, that should be fine. General descriptions give you more flexibility for partial releases.
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Kelsey Hawkins
I'm dealing with something similar but the borrower wants to sell collateral that's underwater relative to the loan balance. Anyone know if that changes how we handle the UCC release?
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Logan Stewart
•You'd still need to release your interest in the specific collateral, but you might want to require the proceeds to go toward loan paydown.
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Sean Matthews
•Depends on your loan agreement. Some require proceeds to pay down principal, others let you keep the general collateral basket.
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Dylan Fisher
Just a heads up - I tried handling a similar situation myself and totally messed up the UCC-3 filing. Had to refile twice because I used the wrong amendment type. Ended up using Certana.ai's document checker for the third attempt and it worked perfectly. Wish I'd used it from the start!
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Diego Castillo
•What kind of mistake did you make on the amendment?
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Dylan Fisher
•I checked the wrong box - put termination instead of partial release. The system flagged it as inconsistent with my original filing.
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Edwards Hugo
For what it's worth, I've found that most equipment sales go smoothly if you just follow the basic steps: 1) Check loan agreement for consent requirements, 2) Get proper authorization, 3) Coordinate sale timing, 4) File UCC-3 amendment promptly, 5) Update your collateral tracking. The "UCC sale definition" thing is really just industry shorthand.
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Diego Castillo
•This is super helpful - thanks for breaking it down into concrete steps!
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Edwards Hugo
•No problem! I keep a checklist for these situations because there are always little details you can forget.
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Gianna Scott
•Smart approach. I should probably create a similar checklist for our team.
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