Texas Commercial Law Firm

IV. Repossession and Foreclosure of Personal Property

A. The Uniform Commercial Code: History and General Principles

Although Article 9 of the Uniform Commercial Code (“UCC”) may seem complex and obtuse to one unfamiliar with it, in actuality, the UCC greatly simplified pre-code personal property security devices. The UCC was created to simplify various bodies of law in each state relating to creating an enforceable lien against personal property. Prior to the UCC, each type of personal property (chattel paper, instruments, equipment, etc.) had its own body of law and procedures. Perhaps the most revolutionary and innovative change brought by Article 9 was to develop a universal security device governed by a uniform set of laws. Article 9 applies to contractual liens and specifically excludes from its coverage judgment liens or statutory liens. Such liens arise by operation of law rather than by contract. Similarly, Article 9 specifically excludes realty (other than fixtures). To create a security interest in personal property under Article 9 the lien must “attach”. This means the lien has become enforceable against the debtor and against third parties not holding “perfected” liens. Perfection is generally achieved under the Code by proper filing of notice.

In order to have an enforceable security interest and the right to repossess and foreclose, the creditor must take the steps set forth in Article 9. Once a creditor complies with these fairly simple requirements, a security interest is created in his favor and the lien is said to "attach."

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