UCC Lien Guide

Published: 15th February 2011
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I am a Judgment Broker, not an attorney, and this article is my opinion, please see a lawyer if you need legal advice.

A UCC (Uniform Commercial Code) lien, is either a general or a specific lien on most business property, and certain types of personal property. A UCC lien does not encumber real estate property. (Real estate requires a different kind of lien, for example an abstract of judgment, recorded at the county recorder where the property is located.)

A UCC lien can be voluntary, for example, as a condition to getting something financed, or as condition to fulfilling a business contract or obligation.

UCC liens can also be involuntary, for example, when a judgment owner records a UCC lien against both most business property, and certain kinds of the debtor's personal property.

A UCC lien encumbers business property, but it also covers certain kinds of personal property, and may also have some "long shot" advantages.

UCC liens are obtained from a Secretary Of State (SOS), and each state's SOS is different. It's a good idea to find and read the laws of your state on personal property liens. Then find your state's SOS web site. A good guide to all SOS offices can be found at http://www.coordinatedlegal.com/SecretaryOfState.html In California, the UCC lien is named a JL-1, and CCP 697.510-697.670 specifies the kinds of personal property liened as:

1) Accounts Receivable (If you can show what someone owes the debtor.)

2) Chattel Paper (Legal papers proving secured ownership of something.)

3) Equipment (Excluding vehicles and vessels registered with the DMV, and Mobile homed or commercial coach registered under Health and Safety Code.)

4) Farm Products.

5) Inventory (Durable goods held for sale by retail merchant with unit value greater than $500 or other inventory that is not held by a retail merchant for sale.)

6) Negotiable Documents of Title (Any written instrument, for instance a bill of lading, a warehouse receipt, or an order for the delivery of goods.)

If your debtor owns or is a business, always record a UCC lien. If you know the business assets of the debtor, write them down on the UCC lien. You might get paid if the business is sold or financed. If your debtor is rich and owns an aircraft, register the UCC lien with the FAA in Omaha, and for large boats, register the UCC lien with the Coast Guard.

Most debtors do not own a business, and most do not have much of the type of personal property that UCC liens cover. However, there are several reasons to consider recording a UCC lien on an average (non-business) judgment debtor:

1) The UCC lien is very easy and cheap, and it costs just $10 and one stamp in California. Recording a UCC lien might annoy, notice, or intimidate a debtor.

2) The UCC lien might get the attention of a lender when the debtor tries to get financing or borrow funds.

3) Most UCC liens last five years (they can usually be extended within six months of expiration) and recording one might provide you a secured status if the debtor files for bankruptcy (and has assets).

Like many other liens in bankruptcy court, a UCC lien is only a piece of paper unless you can identify and locate specific property encumbered by the lien. (This is why you should write down any known assets of the debtor on the UCC lien.)

Usually, a court-scheduled debtor exam (called an Order for EXamination - OEX, or a Judgment Debtor Examination - JDX) lien, when personally served on the debtor, is a much better lien on personal property.

OEX/JDX liens are more comprehensive and provide better security as they apply to all non-exempt property of the debtor. Most OEX/JDX liens are only good for one year, but they can be extended with a motion filed before their expiration for good cause. (Or, you can serve the debtor every year with a new OEX/JDX, renewing the lien.

4) If your judgment debtor is fortunate enough to win even $500 in the lottery, the Lottery Commission will look at all UCC liens, to determine if the winner owes money. If they do, they will pay the creditors in full before they pay the judgment debtor a single penny.

To record a UCC lien, get the form from the Secretary Of State where your debtor has or may have assets. Complete the form, filling out all the information required, e.g., name of debtor, amount of judgment, etc. Mail it with a check, often $10. When you get the form back, mail a copy of it to the debtor. There is no need to file a UCC lien at a County Recorder. Existing UCC liens can be used to find clues to debtor's assets. UCC do not usually show bank accounts, unless a bank has a lien for a loan for equipment. Sometimes business debtors will have a bank UCC lien because the debtor took a loan with the bank.

Usually, a UCC lien is not a direct method to recover money from the debtor. For example, one could record liens, including a UCC, to lien the debtor's computer equipment. To actually recover, you may need to find out who the business does work for, and obtain an assignment order for their customers to pay you, instead of the debtor.

When the judgment debt is satisfied, make sure to release the UCC lien, and mail a copy of the UCC lien release to the debtor.


Mark D. Shapiro - Judgment Broker, http://www.JudgmentBuy.com - where Judgments go to get enforced. JudgmentBuy has the best judgment recovery system, best judgment FAQ and best judgment leads.

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