Business Law

Business Law Annual Review 2017

Describing the Collateral Subject to a "Blanket" Lien, or How to Knit a Big, Soft, Warm Blanket

Dean T. Kirby, Jr.

Dean Kirby is a member of firm of Kirby & McGuinn, A P.C., a seven-lawyer boutique firm with offices in San Diego. He represents lenders, creditors, and fiduciaries in bankruptcy, foreclosure, and commercial collection matters. Mr. Kirby is a member of both the Commercial Transactions Committee and the Business Litigation Committee, and editorial contributions were made by members of both committees.

Commercial lenders, more often than not, require a first priority "blanket security interest," which they expect will encumber all personal property assets of the borrower. Why is it not surprising that a lawyer must say . . . "It’s not that simple?"

To begin with, how should the collateral be described in a "blanket" security agreement? Uniform Commercial Code (UCC) Article 9, section 9-102 defines a list of generic types of collateral that, if all of them are used in a collateral description, will create a lien on almost all of the debtor’s personal property that is subject to Article 9. These are the generic types:

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