So, you just discovered that your UCC Financing Statement has been fraudulently terminated by the debtor. You are likely wondering what comes next. Is there anything you can do to reassert your priority position and minimize your risk? Don’t panic, there are several ways you can address the situation. Here are a few options you may want to explore:
There are only a few instances where a debtor-authorized termination is effective under Article 9 of the Uniform Commercial Code. As the Secured Party of record, if you did not grant authority to the debtor or fail to file a termination statement after satisfaction of the debt, the termination statement is likely ineffective. If the termination statement is ineffective, no further action may be required on our part to maintain your secured position.
File a Correction Statement
Upon discovery of a fraudulent termination, some Secured Parties are opting to file a correction statement with the filing office. Although the code only authorizes debtors to file correction statements, since they have no legal affect on the effectiveness of the filing, Secured Parties are using them as a means to note in the public record that the termination was filed without proper authorization.
File a new UCC1
Other Secured Parties have elected to address the termination by filing a new UCC1 Financing Statement, noting in the collateral description that their previous filing was fraudulently terminated.
Lastly, consider taking advantage of a monthly lien monitoring program that will screen your accounts regularly and alert you to any critical filings that may jeopardize your priority position to collect on debts.
Be sure to review the code carefully and speak with your legal counsel when determining your best course of action.