On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper's existing and after-acquired equipment. On June 21, Harper was petitioned involuntarily into bankruptcy under Chapter 7 of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern filed the financing statement. Which of the parties will have a superior security interest in the equipment?
A.The trustee in bankruptcy, because the filing of the financing statement after the commencement of the bankruptcy case would be deemed a preferential transfer
B.The trustee in bankruptcy, because the trustee became a lien creditor before Eastern perfected its security interest
C.Eastern, because it had a perfected purchase money security interest without having to file a financing statement
D.Eastern, because it perfected its security interest within the permissible time limits
You are correct, the answer is D.
Eastern has a superior security interest because Eastern perfected its security interest within the permissible time limits. Under the Uniform Commercial Code (U.C.C.), to perfect a security interest, a creditor has 10 days from the date of the sale of equipment to perfect the security interest by filing a financing statement. Having filed within the 10-day limit, Eastern has a valid perfected security interest in the equipment and after-acquired equipment despite the fact that the bankruptcy was filed two days earlier.
My review course said it is 20 days…(not 10 days) anyone confirm my understanding? Thanks
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