3JM Company Inc.

Published Articles by David Balovich

Published in: Creditworthy News
Date: 2/2/00

John Kellogg recently sent me the following email:
Dave, I just returned from my industry group meeting where the proposed revisions to Article 9, specifically Article 9.5 were explained to us by an attorney. I am more confused now then I was before her presentation. Is it possible you could discuss this in one of your future columns in language that I could understand? Thank you.

John, I will do my best to explain the major revisions as simply as possible. However, I am not an attorney and this is not to be considered legal advice. For legal advice consult an attorney and if you do not have one, I would recommend contacting Bob Bernstein at Bernsteinlaw.com or Glenn Reismann at Glenn Reisman@ Corporate GE.com these gentlemen are very experienced in creditor law.

Many of the Articles contained in the Uniform Commercial Code are being reviewed for revision under the powers of the National Conference of Commissioners on Uniform State Laws.

Article 9, Secured Transactions, is one of the articles currently being revised. It appears a central issue to the revision of this article revolves around the current Section 9.4 and its replacement, the proposed Section 9.5.

There are four major changes in the proposed replacement.

First is the role of the filing offices. Under the present section, legal issues and administrative details are left to the discretion of the filing office. Some filing offices require that titles be included with debtor and secured party signatures while others do not. Some offices require that the person signing the original financing statement also be the same person signing amendments, continuations, etc., while others do not.

Under the proposed 9.5 revision, legal issues would be left to the attorneys representing filers and any creditor, trustee or debtor who challenges the filing and ultimately the courts. The filing office would be responsible for the filing and record keeping of the documents and this administrative function would be standardized by statute.

One of the benefits to the filer is that any rejection of filing documents would be based on a uniform statute rather then local filing office practices.

Presently, 9.403 says Presentation for filing of a financing statement and tender of the filing fee or acceptance of the statement by the filing officer constitutes filing.

This statement provides the filing office to reject a financing statement for whatever reason they choose and without explanation. I have personally had filings rejected and when I have challenged the rejection been told that the filing should not have been rejected but they could not tell me why it had been rejected.

Under the proposed revision there would be only seven (7) reasons for a filing office to reject a financing statement.

Another revision is that filings on personal property would be filed in the state where the individual has their principal residence or in the case of a corporation where the company headquarters are located rather then where the property is located. The exception would be in the case of real property which would still be filed in the state where the property is located. This revision would make it easier for someone searching for filings to find all the outstanding filings against an entity.

In our next installment we will continue to discuss the remaining major changes in the revision of Section 9.4.

I wish you well.

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