UCC Financing Statement Mistakes Can Be Deadly

A creditor may protect itself against collection risks by having its customer grant the creditor a security interest in the customer’s assets to secure obligations owing to the creditor. The creditor perfects its security interest by filing a financing statement according to Article 9 of the Uniform Commercial Code (UCC), as adopted in the applicable state where the creditor is filing the financing statement. UCC Article 9 prescribes the form and manner in which a UCC-1 financing statement must be filed. These requirements are intended to ensure that the financing statement sufficiently identifies the debtor and the pledged collateral so as to put other potential creditors on notice of the existence of the security interest.

Recent decisions of the Supreme Court of Florida (the “Florida Supreme Court”) and the United States Court of Appeals for the Eleventh Circuit (the “Eleventh Circuit”)—in 1944 Beach Boulevard, LLC v. Live Oak Banking Company and In re NRP Lease Holdings, LLC, respectively—have made clear that even the slightest deviation from UCC Article 9’s requirements for perfecting a security interest, such as abbreviating a debtor’s name in a UCC-1 financing statement, can leave the creditor with an unperfected security interest subject to avoidance by a bankruptcy estate fiduciary.