Bankruptcy has become a complicated matter for businesses in Illinois. Businesses must be very careful in protecting their rights through gaining security interest in secured transactions and security agreements when a vendor, customer, or client files for bankruptcy protection.
Contracting for a security interest is an effective way for lenders and other companies to protect themselves in the event of bankruptcy of the borrower or other party. A Security interest is created through security agreements. The parties to a security agreement are the debtor and the secured party. The debtor is the person with an interest in the collateral who owes payment or performance of the obligation secured. The secured party is the lender, seller, or other person in whose favor there is a security interest.
A security agreement is an agreement that creates or provides for a security interest. A security agreement must be authenticated, contain a description of the collateral, and value must be given in exchange for the security interest. These requirements can be met in any order. When these requirements are satisfied, a security interest is said to have attached. This is important in bankruptcy proceedings.
As you can see, companies must be well advised when creating security interests and drafting security agreements. At Kepple Law Group we can help businesses draft security agreements and create effective security interests so as to ensure the company’s rights are protected in bankruptcy.
Perfecting a Security Interest
To protect its rights in collateral, a company must ensure that its security interest is perfected. A perfected security interest is senior, or prior, to rights of other secured and unsecured creditors of the debtor, the rights of certain buyers, lessees, and licensees of the collateral, and the rights of a trustee in bankruptcy and other lien creditors of the debtor. Most security interests can be perfected through possession, filing a financing statement, control, or automatically. Observing all legal requirements in detail is a must in obtaining a valid security interest.
Bankruptcy Issues in Peoria?
The Kepple Law Group is highly knowledgeable in bankruptcy matters, including the discharge of debts, and can advise clients in all aspects of bankruptcy proceedings.