UCC reformation after debtor name error - can lender fix collateral description issues?

Exactly this. I've seen reformation work when there's clear evidence the filing was supposed to match specific language in the loan docs but got generalized during preparation.

wait so you can actually change a UCC filing through court action? I thought once its filed thats it unless you do an amendment

The debtor's lawyer is arguing that restaurant fixtures are different from general equipment and our description is too vague. They're claiming priority over specific items we thought we had covered.

That's a red flag. If they're asserting priority claims, you definitely need legal counsel ASAP. Reformation might be your only option to maintain your original filing date for priority purposes.

Interesting - does that tool actually compare the UCC against the security agreement language? That would have been helpful 8 months ago.

Yes, you just upload both PDFs and it cross-references debtor names, collateral descriptions, and other key terms. Wish I'd known about it sooner too.

Would that help now though? Sounds like the mistake is already causing problems with the debtor.

Our loan committee notes from the approval meeting specifically mention restaurant equipment as collateral. Would that help establish intent?

Absolutely. Internal docs showing consistent intent across the transaction will be crucial evidence. Also gather any emails or communications referencing the specific equipment types.

The appraisal probably lists specific restaurant equipment too. That could support your reformation argument.

That's possible, but their attorney seems pretty confident about the specificity requirement for restaurant fixtures. We can't afford to guess wrong on a $340K loan.

yeah but attorneys always sound confident when they want to scare you into settling

True, but restaurant fixtures can have special classification issues. Some are considered real estate fixtures rather than personal property, which complicates UCC coverage.

Because that would make every UCC filing 20 pages long and create more problems when borrowers acquire new property. The broad description system works fine when done correctly.

CORRECTLY being the key word here! How many lenders actually cross-check their descriptions against the security agreement before filing?

We're in a state that generally allows reformation of security documents, but I hadn't considered whether UCC filings get different treatment. That's a scary possibility.

Good point. The notice-filing theory could limit reformation options. This is definitely attorney territory - don't try to handle it internally.

Even if reformation isn't available, you might be able to argue the generic description was sufficient all along. Don't give up without a fight.

How did you resolve it? Did you end up going to court or was there another solution?

We settled for less than we wanted because the litigation costs would have eaten up most of the recovery anyway. Expensive lesson in precise drafting.

Makes sense to do a complete audit before deciding on next steps. Better to know about all potential problems upfront.

Good suggestion. We should probably verify that our debtor name and other filing details are accurate too, since we're questioning our collateral description.

Agreed, but the debtor's attorney obviously thinks there's enough ambiguity to challenge the coverage. That suggests the description might be problematic.

Or the attorney is fishing for a settlement. Without seeing the actual security agreement and UCC filing, it's hard to judge whether their challenge has merit.

honestly this whole situation sounds like it could have been avoided with better document review before filing

Will do. Meeting with our UCC attorney next week to discuss options. Hoping we can find a solution that doesn't cost more than the loan balance.

good luck with it, these collateral description disputes are such a headache