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Protect yourself from mis-indexed UCC Filings and Surprise Creditors by ordering a Search to Reflect

February 9, 2010

In order to perfect their security interest, secured parties should file  their financing statements swiftly, on the correct debtor names and in the appropriate filing office. A diligent secured party’s efforts, however, do not end once the filing office acknowledges acceptance of their financing statement. Experienced filers know that at that point they need to initiate a post filing verification search, more commonly known as a “search to reflect.” A search to reflect is a search of the UCC records of the filing office where you filed your lien, after your document has posted to the index.

The benefits of obtaining in a Search to Reflect are twofold:

1. Confirm State Indexing

Tough economic times have forced many filing offices to make cuts to staffing levels and/or hours of operation in order to save money. With fewer employees responsible for that same amount of work, there is an increased chance of typographical errors when indexing filing information. These data entry errors can cause a filing to be difficult to locate in the public record and put secured parties at risk. Now more than ever, UCC filers are encouraged to adopt a search to reflect as a final step in their UCC filing process.

2. Verify Position

Even when a secured party performs conscientious pre-funding due diligence searches, there is a possibility that a surprise lien could sneak in ahead of their Financing Statement or that a lien was missed on their initial search effort. A search to reflect offers assurance of a filer’s priority position to collect on debts by revealing their position relative to any other claim holders.

A search to reflect is a critical step in the due diligence process. If you are not currently performing any post-funding due diligence, consider adding a search to reflect to your filing process. Many private service companies offer filing packages that include a search to reflect for a small additional charge.

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