A Perfected Purchase Money Security Interest in Inventory Has Priority

question 26

Multiple Choice

A perfected purchase money security interest in inventory has priority over a conflicting security interest in the same inventory if :

• A)the purchase money security interest is perfected three months after the debtor receives possession of the inventory.
• B)the purchase money secured party gives an oral notification to the prior secured creditor before the debtor receives the inventory.
• C)the holder of the competing security interest received notification within eight years before the debtor receives the inventory.
• D)the notification states that the person expects to acquire a purchase money security interest in inventory of the debtor and describes the inventory.

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Definitions:

Holder in Due Course

A party that has acquired a negotiable instrument in good faith and for value, and thus has certain rights to enforce the instrument free from many defenses.

Bankruptcy Protection

A legal status that provides a person or entity temporary relief from creditors and lawsuits while reorganizing or discharging debts under the bankruptcy code.

Holder in Due Course

A legal term for a person who has obtained a negotiable instrument in good faith and for value, thus having certain protections.

Holder in Due Course

A party who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defenses and claims that could be raised against the prior holder.