A secured transaction is created when a buyer or borrower (debtor) grants a seller or lender (creditor or secured party) a security interest in personal property (collateral). A security interest allows a creditor to repossess and sell the collateral if a debtor fails to pay a secured debt. The agreement of the creditor and the debtor that the creditor shall have a security interest in the goods must be evidenced by a written security agreement unless the creditor retains what is known as a possessory security interest by taking possession of the collateral.
This form is a generic sample of an assignment of the security interest that is evidenced and formed by a security agreement. An assignment of a security interest in personal property is similar, in many ways, to an assignment of a deed of trust or mortgage covering real property.
Security interest is a concept used in the legal field to describe a legally recognized interest or lien that a creditor holds over a debtor's property or asset. It is designed to ensure that the creditor has a right to obtain payment or satisfaction for a debt or obligation owed by the debtor. The existence of a security interest gives the creditor priority over other parties with claims against the same asset in the event of default or insolvency by the debtor. There are several types of security interest definitions in legal terms, including: 1. Real Property Security Interest: This type of security interest refers to a creditor's right to claim a specific property, usually land or buildings, as collateral for a debt. It typically involves the use of mortgages or deeds of trust. 2. Personal Property Security Interest: This refers to a creditor's right to claim personal property, such as vehicles, equipment, inventory, or intellectual property, as collateral for a debt. Common examples include security agreements or filings under the Uniform Commercial Code (UCC). 3. Floating Security Interest: Sometimes called a floating charge, this type of security interest allows a creditor to claim a debtor's present and future assets as collateral, without specifying particular assets at the time of agreement. It is often used when a debtor's assets change frequently, such as in business operations. 4. Purchase Money Security Interest (PSI): A PSI is a security interest obtained by a creditor when financing the purchase of a specific asset. It grants the creditor priority over other creditors who may have security interests in the same asset. 5. Consensual Security Interest: This type of security interest arises from an agreement or contract between the creditor and debtor, where the debtor consents to grant the creditor a security interest in specific property or assets. 6. Judicial Security Interest: A judicial security interest arises when a judgment creditor obtains a lien over a debtor's property as a result of a court judgment. This allows the creditor to enforce the judgment by seeking payment through the sale of the property. It is important to understand the various types of security interest definitions in legal terms, as they determine the rights and priorities of creditors in the event of default or bankruptcy. Creditors often use security interests to protect their financial interests and reduce the risks associated with lending money or extending credit to debtors.
