Can A Terminated UCC Not Really Be Terminated?March 29, 2018 UCC, Online UCC System, Due Diligence, Reduce Financial Risk
Can a terminated UCC not really be terminated? The Uniform Commercial Code says terminated UCC filings are no longer effective.
So how can a terminated UCC not really be terminated? There are two scenarios.
- When the UCC record contains more than one secured party of record.
When there is more than one secured party for a single UCC, any of the secured parties can file a termination statement on behalf of all the secured parties. The key is determining what exactly is being terminated; is it the entire claim against the collateral, or alternatively, is it just their own interest in the collateral, in which case the financing statement would remain effective for all other secured parties of record.
This distinction between a full or partial termination is not noted on either the termination document or the index. When reviewing a UCC search result, if it includes a termination statement with multiple secured parties, contact the filing secured party to confirm the exact nature of their termination filing.
- When the Termination is filed without proper authorization.
The Uniform Commercial Code stipulates that a termination statement is only effective when filed by a party with the authority to do so. This typically refers to the secured party of record, though debtors can also file an authorized termination.
But parties other than a secured party of record or an authorized debtor do file termination statements. There are different scenarios, but ultimately, an unauthorized termination does not change the effectiveness of a UCC Financing Statement. There is no way to tell from looking at a UCC termination statement or search result if a termination was filed with proper authority. Again, the interested party will need to follow up with the secured party to verify the status of the claim.
These are the instances in which a terminated UCC is not really terminated. Contact the secured party of record to confirm the scope and veracity of the termination.
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