Alerts

Searching During The Transition

Searching during the RA9 transition period is problematic because financing statements recorded in compliance with prior law place of filing rules remain effective until their lapse date or June, 30, 2006, whichever occurs first. However, state legislatures in Alabama and Arizona enacted unique RA9 transition periods ending December 31, 2006, and June 30, 2007, respectively.
Under prior law, financing statements related to personal property were properly recorded in the jurisdiction where property subject to a security interest was located, whereas under RA9, financing statements are properly filed when recorded only in the jurisdiction where the debtor is located or organized without regard to where the property is located.

Therefore, to discover all financing statements that may judged to be effective during the RA9 transition period, searches must be conducted in both the proper RA9 filing office and the prior law filing office(s).

Searching Individual Debtor Names
Under UCC Revised Article 9

Revised Article 9 of the Uniform Commercial Code placed greater responsibility on secured parties to use the correct debtor name when preparing financing statements. RA9 provides that a financing statement is effective only if recorded under the “correct name” of the debtor. A small safety net is provided to give effectiveness to financing statements recorded under the incorrect name of the debtor, but only if the filing is revealed by a search under the correct name of the debtor using the filing office standard search logic. This saving provision of RA9 is dependent upon the flexibility of filing office search logic, which is generally limited to the elimination of punctuation and common business endings contained in organization names.

The correct name of a debtor that is an organization may be determined by reviewing public records from the state registry where the debtor was created or organized. However, determining the correct name of a natural person may prove to be more difficult depending upon the individual’s adoption and usage of names.

How should UCC searchers determine the correct name(s) of an individual debtor when obtaining searches? They may review personal documents such as a birth certificate, driver’s license, or Social Security card. Bank and tax records may also help determine names that have been adopted and used by the individual.

However, as several recent bankruptcy decisions have demonstrated, courts may find that names other than the legal given name of an individual debtor are correct names for purposes of determining the effectiveness of filings. While it is unclear how courts may view nicknames such as Bubba, Bud or T.J., if it is known that the debtor uses such names it may be prudent to search under those names as well.