A secured party's failure to
use approved forms to provide the names of additional debtors was fatal to its
security interests in those debtors' assets. Secured parties who are listing
multiple debtors should use the approved forms for providing the names. Or they
should file additional financing statements so that each debtor's name appears
on the first page of the financing statement. Use of approved forms is
discussed in this article.
For secured parties, the key to
attaining priority over other claimants and survival of their security
interests in bankruptcy is perfection of their security interests, usually
through the filing of an appropriate financing statement in the proper public
office under Article 9 of the Uniform Commercial Code. See UCC §§ 9-317
(Official Text 2009) (giving perfected security interests priority over lien
creditors and certain buyers); 9-322(a) (according perfected senior secured
parties priority over later secured parties); 9-310(a) (mandating the filing of
a financing statement as the method of perfection in most cases). See also
11 U.S.C. § 544(a) (2011) (allowing the trustee in bankruptcy to set aside
unperfected security interests) [an annotated version of this statute is available to lexis.com
subscribers]. The publicly filed financing statement gives notice to the
world of the secured creditor's interest in certain assets of the debtor and
allows other creditors to adjust their behavior accordingly. The requirements
for a filed financing statement are quite minimal - the debtor's name, the name
of the secured party or its representative, and an indication of the
collateral. UCC § 9-503(a). Nevertheless, secured parties often have trouble
complying with these fundamentals and find themselves out in the cold in
bankruptcy, demoted to the status of a lowly unsecured creditor. In a recent
bankruptcy case, the secured party's failure to use approved forms to provide
the names of additional debtors proved fatal to its security interests in those
debtors' assets. Official Committee of Unsecured Creditors v. Regions Bank
(In re Camtech Precision Manufacturing, Inc.) (hereafter Camtech), 443
B.R. 190 (Bankr. S.D. Fla. 2011) [an enhanced version of this opinion is available to lexis.com
In Camtech, the secured party, Regions Bank, had filed financing
statements listing four debtors in New York and Florida in September and
October of 2007. 443 B.R. at 192. The first debtor was listed in the debtor
name box, the second in the additional debtor box on the first page of each UCC
financing statement. 443 B.R. at 193. Two additional debtors, Camtech and
Avstar Fuel, were listed on a plain piece of paper attached as a second page to
the UCC financing statement. Although both Florida and New York recognized
approved "additional debtor" forms, the Bank chose not to use them. 443
B.R. at 193.
In May 2010, Camtech and Avstar Fuel filed voluntary petitions under Chapter 11
of the Bankruptcy Code. Camtech, 443 B.R. at 192. The Bank asserted
perfected security interests in substantially all of the debtors' personal
property and claimed an unpaid loan balance of over $4 million. The Official
Committee of Unsecured Creditors filed an adversary proceeding against the
Bank, alleging that the Bank's security interests in Camtech and Avstar Fuel's
property were unperfected. The Committee sought to demote the Bank to unsecured
creditor status and to force disgorgement of adequate protection payments made
to the Bank with respect to its security interests. 443 B.R. at 192.
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