The 2001 amendments to the Uniform Commercial Code attempted to dramatically simplify the process of perfecting a security interest in personal property. For most types of personal property, such as accounts receivable, equipment, inventory and raw materials, perfection is accomplished by filing a UCC-1 financing statement with the secretary of state’s office in the state in which the borrower is incorporated. The laws of states concerning perfecting a lien based on a claim obtained by judgment may interfere with the simplicity sought by the amendments to the UCC — of requiring a filing only in the state of a borrower’s incorporation.
Attorneys representing lenders and judgment creditors should beware. Following the plain language of the UCC may leave a lender subject to a lien of a judgment creditor that the lender did not know existed. On the other hand, following the plain language of state laws concerning perfecting a judgment lien on personal property may leave judgment creditors with no lien at all.
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