Security Trust Agreement
Secured transactions involving personal property are regulated under the Uniform Commercial Code for each state. A security trust agreement gives a lender a secured interest in the personal property used as collateral for the loan. The lender holds title to the property until the loan is paid.
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Statute of Frauds
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Collateral can be a vehicle, stock, livestock or intangible collateral such as accounts receivables, promissory notes or patents. Security trust agreements involving collateral that remains in the debtor's possession or intangible personal property must be in writing pursuant to the statute of frauds to be enforceable.
UCC-1 Financing Statement
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The lender must perfect their interest in the collateral by recording the security trust agreement or filing a UCC-1 Financing Statement with the Secretary of State's office where the collateral is located, or if it is intangible collateral where the debtor's principal place of business is located, giving notice of their interest in the collateral. The filing of the UCC-1 creates a lien on the collateral until the loan is paid in full by the debtor.
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Agreement Provisions
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The security trust agreement must contain the debtor's signature, the description of the collateral and language setting forth the intent to create a security interest in the collateral by the debtor to the lender.
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