Professor Margit Livingston on Article 9 Financing Statements: The Debtor's Name and the Transition Rules Under the 2010 Amendments

Professor Margit Livingston on Article 9 Financing Statements: The Debtor's Name and the Transition Rules Under the 2010 Amendments

The debtor name issue has been a troublesome one for decades. Legislative and judicial attempts to grapple with it have not been entirely successful. Once again, the drafters are hoping that this latest round of amendments will finally resolve this key question and make the public record system even easier for filers and more informative for searchers.


Achieving perfection of their security interests is essential for secured parties under Article 9 of the Uniform Commercial Code. Perfection leads to priority over other claimants to the debtor's property and to survival of the security interest in the event of the debtor's bankruptcy. See U.C.C. §§ 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). See also 11 U.S.C. § 544 (a) (2011) (allowing the trustee in bankruptcy to set aside unperfected security interests). The Article 9 drafters hoped that secured parties could easily perfect their security interests by the filing of a financing statement, a relatively simple document, in the public record. U.C.C. § 9-312 (a) (2009). Overall, the drafters have attained their goal of providing secured parties with a straightforward way of perfecting their security interests. But much litigation has occurred and continues to occur regarding the appropriate debtor name to use on the financing statement. Because searchers commonly enter the debtor's name as the search term in the electronic filing system, accuracy in the debtor's name is paramount to ensuring that the filing system provides adequate public notice.

In 2010, the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Law Institute (ALI) promulgated a number of amendments to the existing 2001 version of Article 9, with a suggested effective date of July 1, 2013. Many states have enacted the 2010 Amendments, and legislation is pending in several others. In amending Article 9, the drafters sought to address several problematic areas, including the name issue for individual debtors (i.e., natural persons). The 2001 version of Article 9 requires only the debtor's "name" on a financing statement where the debtor is an individual. U.C.C. 9-503 (a)(4) (2009). Courts have differed as to whether "name" means "legal name" or any name by which the debtor is commonly known, such as a nickname or a driver's license name. The 2010 Amendments attempt to resolve that division through two alternate debtor name provisions, which will be discussed below.

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