UCC loans collateral filing nightmare - equipment already sold before I filed continuation

That's what I was afraid of. The bank is acting like this is entirely our fault but they never sent any notices about the continuation deadline. Shouldn't they have some responsibility to track their own collateral filings?

Unfortunately most loan agreements put the burden on the borrower to maintain UCC filings. Check your loan docs - there's probably language about keeping security interests perfected. Banks usually don't monitor continuation deadlines unless it's a massive credit facility.

This is exactly why I set calendar reminders 8 months before every UCC expiration. The system doesn't send you birthday cards about this stuff.

I thought so too but when I pulled the filing records it shows the original was actually filed in July 2019, not 2020 like I remembered. So it expired July 2024. The bank's records were confusing because the loan closed in early 2020 but apparently they filed the UCC-1 during the application process.

Ah, that makes more sense. Yeah, banks often file UCC-1s during underwriting before loan closing. So you definitely had a gap period where the security interest was unperfected. That's going to be a problem for any asset sales during that window.

Never heard of that but I'll check it out. At this point I need to understand exactly what went wrong with our filings. Did it actually help you identify problems?

Yeah, it flagged several debtor name mismatches between my UCC-1 and corporate documents that could have invalidated the whole filing. Much faster than trying to compare everything manually. Just upload the PDFs and it does the cross-checking automatically.

I'm skeptical of automated tools for legal documents but I guess if it's just flagging obvious inconsistencies it might be useful for a quick check.

We did notify them about the crusher sale but it was just an informal email to our loan officer. No formal approval process. The conveyor sale we handled through our normal operations without telling them.

The email notification might be something. If you can show they knew about the sale and didn't object, that could support a waiver argument. But the second sale with no notice is going to be harder to defend.

I get the frustration but the 5-year rule exists for a reason. Public records shouldn't be cluttered with stale filings forever. The system assumes borrowers will track their own obligations.

Right, because small business owners have nothing better to do than maintain filing calendars for their lenders. Meanwhile the banks profit from the loans but take zero responsibility for protecting their own security interests.

Actually had a similar rant about this last year. The continuation deadlines are brutal if you miss them by even a day.

I think our original loan officer mentioned it verbally during closing but I don't have anything written. The loan agreement just has standard language about maintaining security interests.

Verbal promises are tough to prove. Check all your email correspondence from the closing period - sometimes loan officers send follow-up emails that could contain helpful language about their filing responsibilities.

What kind of leverage did you have in the settlement talks? Right now they're demanding full payment and acting like we're completely in the wrong.

We had some emails where the bank acknowledged receiving notice of inventory sales, which suggested they weren't treating their security interest as critical. Also threatened to countersue for negligent misrepresentation about filing procedures. Sometimes banks prefer certainty over fighting.

Settlement might be the way to go here. Litigation over UCC priority disputes gets expensive fast and the outcome isn't guaranteed even with good facts.

You're right, it was a new UCC-1 filing. I keep calling it a continuation but that's not technically correct. The new filing covers our remaining equipment but doesn't help with the stuff we sold during the lapse.

Exactly. The new UCC-1 only perfects your interest going forward from the filing date. Any transfers during the gap period would have been to buyers who took free of your security interest.

We got about $180k for both pieces of equipment and applied it all to the loan balance. So the bank got the benefit of the sales proceeds even if they lost their security interest. That seems relevant somehow.

Definitely relevant. They can't have it both ways - claiming the sales were unauthorized while keeping the proceeds. That could support an argument about ratification or unjust enrichment.

Good point. If they accepted and applied the sale proceeds without objection, that's strong evidence they ratified the transactions despite the lapsed UCC filing.

Yeah, debtor name mismatches are one of the most common UCC filing errors. Good thing you caught it before it became an issue. The name has to match exactly or the filing might not be effective against third parties.

Exactly what the tool flagged. Would have been a nasty surprise to discover during a refinancing or asset sale. Worth the time to run these checks periodically.

Actually yes, our loan was sold to a larger regional bank about 2 years ago. We got a notice about the transfer but all our payments kept going to the same servicer. I never thought about how that might affect UCC filing responsibilities.

That could be significant. When loans are sold, the new lender usually needs to file a UCC-3 assignment to transfer the security interest. If they didn't do that properly, or if there was confusion about continuation responsibilities, you might have additional arguments.

Good catch. Loan transfers definitely complicate UCC filing chains. The assignment should be on record if it was done properly.

You're probably right. I was hoping to handle this internally but the stakes are too high. Any suggestions on finding the right kind of lawyer? Most commercial attorneys don't specialize in UCC issues.

Look for attorneys who focus on banking law or commercial finance. They deal with UCC issues regularly. You can also check with your state bar association for referrals to commercial law specialists.