Secured transactions in the United States

Secured transactions in the United States are an important part of the law and economy of the country. By allowing lenders to take a security interest in a debtor's asset as collateral, secured transactions provide lenders with greater confidence that they will be repaid. This increased assurance, in turn, allows lenders to lend capital to businesses at interest rates that are lower than the rates those businesses would otherwise be able to obtain. In short, secured transactions help to lower the cost of capital, and so encourage the growth of the economy.

In law, secured transactions are an integral part of the Uniform Commercial Code (UCC). Article 9 of that Code governs personal-property secured transactions in all fifty American states.fn|1 The provisions of Article 9 supply a predictable way of creating and enforcing security interests in movable property, intangible property, and fixtures. Because of the importance of secured transactions, commercial lawyers typically have (or claim to have) great familiarity with the provisions of Article 9. Real-property secured transactions are governed not by Article 9 but by real-property laws that are not necessarily uniform from state to state.

Security interests are particularly valuable in bankruptcy, because those creditors who have security interests in a bankrupt debtor's estate have priority—i.e., will get paid before—creditors who lack such interests ("unsecured" creditors).

Notes

*Even Louisiana, much of whose commercial law is based on Continental civil law, and not on the Anglo-American common law from which the UCC ultimately derives, has adopted Article 9 to govern its secured transactions. See La. Rev. Stat. Ann. tit. 10, §§ 9-101 to -710 (West 2004).