Perfection

Perfection is the legal status by which a security interest becomes enforceable against third parties, competing creditors, transferees, and the debtor's bankruptcy trustee. Without perfection, a security interest is enforceable against the debtor but vulnerable to defeat by intervening creditors and trustees. Perfection establishes the secured party's place in the priority queue.

Methods of perfection

Filing (§ 9.310): the default method, accomplished by filing a UCC-1 financing statement. Available for most types of collateral.

Possession (§ 9.313): perfection by the secured party taking and retaining possession of tangible collateral. Available for goods, instruments, money, negotiable documents, certificated securities, and tangible chattel paper.

Control (§ 9.314): perfection by the secured party obtaining "control", a defined term, over deposit accounts, investment property, letter-of-credit rights, and electronic chattel paper. The control mechanism varies by collateral type.

Automatic perfection: certain narrow categories perfect automatically without filing or possession, most notably, purchase money security interests in consumer goods (§ 9.309(1)).

Continued perfection in proceeds (§ 9.315)

A perfected security interest in collateral typically continues automatically into identifiable proceeds for a 20-day grace period; continued perfection beyond 20 days requires that proceeds be of a type to which the original financing statement applies, or that the secured party take additional perfection steps.