As a creditor, you want security to ensure that you get paid the amounts owed you when you lend money or extend credit. One way to do that is through filing a Uniform Commercial Code-1 financing statement. Simply put, a financing statement is a way to put on record that a creditor is using something of the debtor as collateral to secure the debt. If a creditor properly files the financing statement, the creditor may get priority over other creditors in that collateral if the debtor fails to pay and collection is required.
It is important to follow all the requirements for filing a financing statement. One item to pay particularly close attention to is that of the name of the debtor. In addition to making sure you have the correct name, the name must be spelled correctly, including correct placement of things like commas, periods, and blank spaces. If your financing statement fails to sufficiently provide the correct name of the debtor it can be rendered “seriously misleading” and therefore ineffective to secure your priority in the collateral over other creditors. This is because other creditors searching for the debtor by its correct name may not find your financing statement if it is not spelled correctly.
To ensure you have the right name, spelling, and punctuation, you should check the business entity registration for the state in which the debtor is incorporated to check what name the debtor has used in its articles of incorporation. Utah’s UCC search can be found here. Doing so will ensure that you are using the correct name and spelling when you file your financing statement.
There is one exception to the requirement of having an accurate name. That is, if doing a search under the state’s filing system using the correct name of the debtor discloses a financing statement that fails to sufficiently provide the name of the debtor, that financing statement is not seriously misleading. However, as a matter of good business practice, it is always better to make sure you have the correct debtor name before you file, rather than trying to rely on an exception to the rule to protect your priority.
If you need help with your financing statements or you have other questions regarding securing debts owed to you, give me a call and I would be happy to discuss your case.
Kevin M. Bischoff