This course covers credit transactions in which the loan is secured by an interest in personal property. These transactions are largely governed by Article 9 of the Uniform Commercial Code. The course will include coverage of loans secured by mortgages on real estate.
A secured loan is one in which the debtor and lender agree that if the debtor does not pay, the lender can take specific items of property from the debtor. This property is called collateral, and the lender is said to have a security interest in the collateral. The collateral may be tangible property such as inventory, equipment, and consumer goods, or intangible property such as stocks and bonds or the debtor's right to collect from people who owe money to him. Secured credit is a very important part of both consumer and commercial lending. This course will study both contexts, examining how secured transactions are structured and why they are structured that way.
The course examines the mechanics of making secured loans, the rules that govern repossessing the collateral if the debtor doesn't pay, and what can happen to security interests if the debtor goes bankrupt. It also examines the priority rules that rank competing claims to the same collateral. There may be many such claims. More than one secured lender may have a security interest in the collateral; unsecured creditors may seize the collateral to collect a judgment; customers or other third parties may buy the collateral; the collateral may be affixed to real estate and become subject to the claims of people with interests in the real estate.
This is also a course in statutory construction. We will devote very careful attention to using and interpreting the Uniform Commercial Code, the Bankruptcy Code, and in some sections, the Federal Tax Lien Act. We will progress from relatively simple statutory provisions to quite difficult ones, learning the skills that can be applied to all sorts of statutes.