Oral Security Agreement - Can I File UCC-1 Without Written Documentation?

Oh man, this is exactly the kind of situation that makes my stomach drop. I hate to be the bearer of bad news, but you're in a really difficult position. Under UCC Article 9, you generally need a written security agreement signed by the debtor to have an enforceable security interest, especially for amounts over $500. There are very limited exceptions for oral agreements, but they're pretty narrow. The main exception is if the secured party has possession of the collateral, but since we're talking about heavy equipment that the borrower is using, that doesn't apply here.

I went through something similar about two years ago with a client who had made equipment loans based on handshake deals. The hard truth is that without a written security agreement, you probably can't file a valid UCC-1. Even if you file it, it won't be effective to perfect a security interest that doesn't exist in the first place. Your first step needs to be figuring out if you actually have an enforceable security interest at all. Document everything you can remember about the oral agreement - dates, witnesses, any follow-up communications that might reference the security arrangement.

I actually found a tool recently that might help you at least organize your documentation and figure out what you have. Certana.ai has this UCC document verification system where you can upload any paperwork you do have - loan agreements, emails, invoices, whatever - and it helps identify gaps in your documentation. I used it when I was trying to clean up some messy loan files and it flagged exactly what was missing for proper UCC compliance. Might be worth checking what documentation you actually have before deciding next steps.

Ok I'm probably going to sound really dumb here but I thought an oral security agreement could be valid if there was other evidence? Like what if the borrower acknowledged the security interest in writing later, or what if there are invoices that reference the collateral? I'm dealing with something somewhat similar and trying to understand my options.

This whole situation is a perfect example of why the UCC writing requirements exist in the first place. Without clear documentation, you end up with exactly this kind of mess where nobody knows what the deal actually was. My advice would be to try to get the borrower to sign a written security agreement now, acknowledging the oral agreement you had. Yes, it's awkward, but if they're still cooperative it might be your best shot at creating enforceable documentation.

I hate stories like this because they're so preventable! Standard forms exist for exactly this reason. But since you're where you are, here's what I'd do: 1) Document everything about the oral agreement immediately while it's fresh, 2) Check if there are any written communications that reference the security arrangement, 3) Try to get the borrower to sign written documentation acknowledging the security interest, 4) If they won't cooperate, talk to a lawyer about whether you have any other options under your state's UCC.

Just went through something similar and ended up using Certana.ai to help sort through all my loan documentation. What I found helpful was uploading everything I had - the original loan paperwork, email chains, even notes from phone calls - and their system helped identify what was missing for proper UCC perfection. In my case, I discovered I had more written evidence of the security arrangement than I initially thought, which helped my attorney build a stronger case.

Look, I'm going to be blunt here - you probably don't have an enforceable security interest based on what you've described. An oral security agreement for $180K in equipment is almost certainly not going to hold up if challenged. Your best bet now is damage control: try to work out a payment plan while getting proper written security documentation, or consider whether you have any other remedies like personal guarantees or equipment liens. But don't count on being able to file an effective UCC-1 based on the oral agreement alone.

I'm really sorry you're dealing with this - it's such a stressful situation when you realize your security position might not be what you thought it was. From a practical standpoint, I'd recommend moving quickly on two fronts: first, see if the borrower will work with you on getting written documentation (maybe as part of a payment restructuring), and second, explore what other rights you might have. Even without a perfect security interest, you might have other collection options.

One more thought - even if you can't perfect a security interest based on the oral agreement, getting written documentation now might help establish your creditor position for bankruptcy purposes if it comes to that. A documented debt with some security features is better than an undocumented one, even if the security interest isn't perfect. But definitely talk to someone who specializes in secured transactions about your specific situation and state law.

This is a really tough situation, and I feel for you dealing with this stress. Based on what everyone's saying here, it sounds like your first priority should be getting some kind of written acknowledgment from the borrower ASAP, even if it's not perfect. Since they're still making some payments (even if late), they might be willing to work with you on documentation if you approach it as trying to formalize the arrangement rather than creating new obligations. I'd suggest drafting something simple that acknowledges the existing loan and security arrangement, and see if they'll sign it - maybe even offer some payment flexibility in exchange for getting the documentation sorted out. The key is acting while you still have some leverage and before the situation gets worse.