MEE Fast Fact: Attachment (Secured Transactions)

Not only is secured transactions a very complex subject but it is tested with some frequency on the MEE.   There's plenty to say about this subject but an initial place to begin is with the concept of attachment. A security interest will not be enforced unless it has first attached.  Essentially, this means that the secured party will have no rights against the debtor unless there has been an attachment of a security interest.  And attachment requires the following:

(1): The parties (the secured party and the debtor) must agree to create a security interest.  Evidence of this agreement can be accomplished in a few ways, one of which is the creditor taking possession of the collateral (personal property of the debtor).  In addition, the interest can be evidenced by the debtor authenticating a security agreement describing the collateral.  Finally, the agreement can be evidenced by the secured party taking control of certain types of collateral.

(2): In addition to the evidence outlined above, value must be given by the secured party to the debtor.

(3): Lastly, the debtor must have ownership rights in the property used as collateral.

If all three elements above are satisfied, a security interest has attached.  That's just the beginning, but it's a good place to start.