Priority of a Secured Party vs a Buyer of Collateral

The video tutorial explains the priority of a buyer of collateral compared to the rights of a secured party. It details how a secured party's interest remains superior even after the debtor sells the collateral. However, there are three exceptions where the buyer can take the property free of the security interest: if the secured party authorizes the sale, if the buyer purchases in the ordinary course of business, or if a consumer buys consumer goods from another consumer without a filed financing statement.

What happens to a security interest when the debtor sells the collateral?

• The security interest is automatically voided.

• The security interest is shared between the debtor and buyer.

• The security interest remains attached to the property.

• The security interest is transferred to the buyer.

Under what condition can a buyer take property free of a security interest?

• When the secured party has authorized the sale.

• When the property is sold at a loss.

• When the buyer is aware of the security interest.

• When the debtor has not paid the debt.

What is a requirement for a buyer in the ordinary course of business to take property free of a security interest?

• The buyer must not know the sale violates a security interest.

• The buyer must be aware of the security interest.

• The buyer must purchase the property for personal use.

• The buyer must pay in cash.

In a consumer-to-consumer sale, when can the buyer take the property free of a security interest?

• When the sale is conducted online.

• When the buyer is a business entity.

• When the original secured party relies on automatic perfection.

• When the original secured party has filed a financing statement.

What is automatic perfection in the context of consumer goods?

• A condition where the debtor automatically owns the property.

• A method where a security interest is perfected without filing.

• A situation where a security interest is transferred to the buyer.

• A process where a security interest is automatically voided.