UCC oral security agreement valid when creditor has possession of collateral - filing question

Thanks for confirming! So we should definitely file the UCC-1 even though possession gives us some protection. Better safe than sorry with a $150K loan.

Wait, if they have possession, why file at all? Possession IS perfection for most tangible goods like jewelry.

Possession works for perfection but filing gives you broader protection and priority. Plus if the collateral ever leaves their possession temporarily, you want that filing in place.

That's a scary scenario. We do have the original loan application that mentions the jewelry as collateral, plus the appraisals. Would that be sufficient written evidence?

Better than nothing but not ideal. A simple written acknowledgment that the jewelry is held as security for the loan would be much cleaner.

Interesting, never heard of that service. Did it help with the oral agreement documentation issue or just the filing consistency?

It helped identify gaps between what we had documented versus what we were filing. Made me realize we needed better written backup even with the oral agreement being valid.

I've been wondering about tools like that. Did it flag the collateral description issues specifically or broader document problems?

Ha! I hear you. The appraisal values changing constantly doesn't help either. But the client relationship is worth dealing with the complexity.

Jewelry can be tricky but at least it's easy to maintain possession. Try dealing with inventory that moves around constantly!

Good point about documenting the reconstruction efforts. We're keeping detailed notes of what we're finding and how we're rebuilding the file.

Smart approach. Also check if the borrower has copies of anything. Sometimes they keep more paperwork than you'd expect.

Insurance companies sometimes require copies of loan docs too. Might be worth checking with their business insurance carrier.

Good question! It's in a proper bank safety deposit box that only the lender can access. Should be solid possession under UCC standards.

Perfect. That's textbook possession for UCC purposes. Much better than just sitting in someone's desk drawer.

That's a great suggestion for the description language. Specific enough to be enforceable but flexible enough to avoid constant amendments.

I like that approach. Just make sure you actually keep those appraisals on file and easily accessible.

Would you need to update the UCC if the appraisals get updated? Seems like that could create maintenance headaches.

Any rules of thumb for when to file versus just rely on possession? This client situation seems like filing makes sense given the loan amount.

I always file unless there's a specific reason not to. The cost is minimal compared to the protection, and it covers you if possession ever becomes questionable.

Bankruptcy complications - didn't even think about that angle. Definitely reinforces the need for written backup documentation.

Exactly. Bankruptcy trustees love to challenge anything that isn't crystal clear on paper, even when the law is on your side.

Ugh bankruptcy trustees are the worst. They'll challenge everything just to create work and fees.

Two mentions of this service now - must be pretty useful. Does it handle situations where you're missing some original documentation like we are?

It works with whatever documents you have. In your case, it could help ensure your reconstructed documentation and UCC-1 filing are consistent with each other.

Right? Reading about all these potential issues makes you want to audit everything. Probably a good use of time though.

Ha! Sorry for causing anxiety but better to catch issues now than during a dispute. Good luck with your file review!

Will do! Planning to file the UCC-1 next week once we finalize the collateral description. Thanks everyone for the helpful input.

Good luck! Sounds like you're taking all the right precautions given the circumstances.