A purchase money security interest transaction is virtually never susceptible to bankruptcy preference attack. An exception to this is where the bank has not perfected the security interest on or before twenty days after the debtor receives possession of the property constituting the collateral.
If the financing statement is not filed (or a lien is not noted on a motor vehicle title) within that time frame, what would otherwise be a protected transaction may now be attacked by the trustee and the bank may lose its lien rights. Likewise, the Uniform Commercial Code requires perfection of the purchase money security interest within the same time frame in order for the transaction priority to relate back to the date that the security interest attached.
Author: Laura A. Scott (bio)
Phone: 812.452.3557
email: lscott@bamberger.com
Tags: bankruptcy, purchase money security, Uniform Commercial Code