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Financing Statement Errors Hurt: Here’s when they are still effective
Just how dangerous are financing statement errors? In short, some are worse than others.
As a Secured Party, you know how much work it takes to bring in business, to approve credit, to structure the debt, to negotiate and document the transaction. What you may not know is how little work is required to put your lien position in jeopardy.
Though the UCC-1 Financing Statement is short, it is complicated. If it’s not properly completed, it may not be valid. Here’s what the Uniform Commercial Code (2010) has to say about it.
U.C.C. – ARTICLE 9 – SECURED TRANSACTIONS (2010) › Part 5. Filing › § 9-506. EFFECT OF ERRORS OR OMISSIONS.
(a) [Minor errors and omissions.]
A financing statement substantially satisfying the requirements of this part is effective, even if it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading.
(b) [Financing statement seriously misleading.]
Except as otherwise provided in subsection (c), a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9-503(a) is seriously misleading.
(c) [Financing statement not seriously misleading.]
If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9-503(a), the name provided does not make the financing statement seriously misleading.
(d) [“Debtor’s correct name.”]
For purposes of Section 9-508(b), the “debtor’s correct name” in subsection (c) means the correct name of the new debtor.
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Need help perfecting security interests? All American Document Services can help. We specialize in UCC-1 Filing as well as UCC Search to Reflect and post-Filing Searches to make your you have maintained your priority position. Check out our homepage to place your order.
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