UCC enforcement priority dispute - secured creditor rights question

This is exactly right. Priority generally goes by filing date assuming both are properly perfected. OP should pull both UCC-1s and compare them line by line.

Yeah but broader collateral descriptions can sometimes create issues. "All equipment" vs specific serial numbers might matter depending on the state's interpretation.

We haven't gotten legal counsel yet but probably should. The frustrating part is the debtor is using this dispute to delay any enforcement action.

Don't let the debtor play games. They don't get to decide priority between secured creditors - that's determined by UCC Article 9 rules.

Interesting suggestion. What kind of defects would invalidate a UCC-1 filing?

Common ones are debtor name mismatches, incorrect addresses, vague collateral descriptions that don't meet sufficiency standards, or filing in wrong jurisdiction. Small errors can sometimes void perfection.

Good point about checking for defects first. Much cheaper than fighting over priority if one filing is actually invalid.

Equipment financing definitely has more moving parts than real estate. But the UCC priority rules are pretty clear once you understand them.

Clear in theory maybe, but try explaining priority to a client when there's $180K of equipment and two lenders claiming it.

Exactly. The filing date determines priority, not the scope of the collateral description. OP needs to stop second-guessing themselves.

Well, collateral description does matter for perfection though. If their description doesn't properly cover the equipment, they might not be perfected at all.

Good point about continuation. Their filing would be from 2022 as well, so might be getting close to the 5-year mark.

If it's from 2022, continuation isn't due until 2027. But definitely verify the exact dates and make sure both filings are current.

Also check for any UCC-3 amendments that might have changed the collateral description or debtor information.

How did you discover the name defect? Was it obvious or did you need to dig into it?

It wasn't obvious at first glance. The name looked right but didn't exactly match the debtor's legal name on their articles of incorporation. Small difference but enough to affect perfection.

This is exactly why document verification tools like Certana.ai are helpful. They can spot those subtle name mismatches that might not be obvious in a manual review.

We haven't approached them about subordination yet. Might be worth exploring if the priority issue is unclear.

Why would they subordinate if they think they have equal or superior rights? OP should establish their priority position first.

Good point. We were considering self-help repossession but sounds like we need to resolve the priority issue first.

Or get a court order for the repossession. Safer than self-help when there are competing claims.

Judicial enforcement is definitely the safer route here. More expensive but less risk of liability.

That's our concern too. The equipment is worth $180K but legal costs could eat up a lot of that.

Sometimes the threat of enforcement is enough to get debtors to cooperate. Have you tried demanding payment in full with a deadline?

Good point. A formal demand letter with a clear deadline might motivate the debtor to resolve this without you having to fight the other lender.

Hadn't considered PMSI. They're not the equipment seller though, so probably not a purchase money situation.

PMSI can apply to financing the purchase too, not just seller financing. But if they're just a general lender, probably not relevant.

Plus PMSI has notice requirements for non-inventory collateral. They would have had to notify you before filing.

We did do a UCC search before lending. The other lender's filing came after ours, which is why we're confused about their priority claim.

Ah, I misunderstood. If they filed after you, they shouldn't have priority unless there's something special about their interest or a defect in your filing.