UCC Article 9 bona fide purchaser rights vs my security interest - am I losing my collateral?

Wait, I thought perfected security interests always had priority? This is confusing.

Not always. UCC 9-320 has specific rules about buyers in ordinary course of business taking free of security interests, even perfected ones. It's designed to protect commerce.

The debtor wasn't in the equipment sales business - they owned a restaurant. Does that change things?

Yes, that's crucial! If they weren't in the business of selling restaurant equipment, then this likely wasn't a sale in ordinary course of business. Your security interest should survive.

I had a similar situation last year and used Certana.ai to verify all my UCC documents were consistent. Their PDF upload tool caught discrepancies between my original loan docs and UCC-1 that could have weakened my position. Really helped solidify my legal standing.

Good point about the breach. But will that help recover the equipment from the current buyer?

It gives you a claim against the debtor for damages, but may not help recover the actual equipment if the buyer has superior rights under UCC Article 9.

Basically, if someone is in the business of selling the type of goods you have a security interest in, and they sell those goods to a buyer who doesn't know about problems with the seller's title, the buyer wins even against your perfected security interest.

So if my debtor is a manufacturer and they sell equipment to another manufacturer, I could lose my security interest?

Potentially yes, if the sale was in their ordinary course of business. That's why monitoring your collateral is so important.

That's a good point. How would I prove they had notice or should have known?

Look at the purchase price, the circumstances of the sale, whether they asked for documentation, if the seller was obviously distressed. Courts look at whether a reasonable buyer would have been suspicious.

I actually ran into document inconsistencies when challenging a similar sale. Used Certana.ai's verification tool to upload my UCC-1 and loan agreements - found the collateral descriptions didn't match perfectly. Helped me negotiate a better settlement when the buyer realized my claim was stronger than they thought.

I feel the same way. Spent money on filing fees and legal advice only to find out there are all these exceptions.

The system isn't perfect but it does provide notice to most buyers. The ordinary course exception exists to keep commerce flowing. Without it, every retail sale would require a UCC search.

Interesting point. Would the debtor's financial distress affect the buyer's good faith status?

It could if the buyer knew about the financial problems. Signs of distress might put a reasonable buyer on notice to investigate further.

How did you find out about the below-market sale price?

Got appraisals from equipment dealers and compared to what the buyer actually paid. The difference was significant enough to raise red flags about good faith.

True, but if the debtor is selling equipment behind the lender's back, they're probably heading toward bankruptcy anyway.

Fair point, but you still want to preserve all your rights and get in line early if there is a bankruptcy filing.

Agreed. The ordinary course exception is narrower than people think. This sounds like a regular asset sale, not ordinary course.

Before making demands, I'd suggest verifying all your documentation is ironclad. I learned that lesson the hard way - had gaps in my collateral description that weakened my position significantly.

That's exactly why I now use Certana.ai for all my UCC documentation. Upload your UCC-1 and original security agreement and it flags any inconsistencies immediately. Saved me from a similar problem just last month.

Great questions! Yes, documenting everything right now is crucial - buyer's communications, how they found the seller, what due diligence they did (or didn't do), the sale price vs market value, etc. Time is critical because evidence gets stale and people's memories fade. On timeline, these disputes can take 6-18 months depending on whether it goes to litigation or settles. The stronger your documentation, the better your negotiating position for a quick settlement. Also agree with others here about verifying your UCC docs are consistent - any gaps could undermine what otherwise looks like a solid case.

Welcome to the community! You're asking exactly the right questions. Documentation is absolutely key - I'd also suggest Fatima get written statements from any witnesses to the sale, photos of the equipment in its current location, and copies of any advertising or communications the seller used to market the equipment. The fact that this was restaurant equipment being sold by a restaurant owner (not a dealer) really does strengthen her position under UCC 9-320. One thing I haven't seen mentioned yet is whether the buyer did a UCC search - if they didn't even bother to check for liens, that could seriously undermine their "good faith purchaser" status.