Quick Perfection is Necessary for Purchase Money Security Interest
A purchase money security interest transaction is virtually never susceptible to bankruptcy preference attack. An exception to this is where the lender has not perfected the security interest within the time frame designated under the Uniform Commercial Code. The Uniform Commercial Code requires perfection of the purchase money security interest on or before twenty days after the borrower receives possession of the property constituting the collateral. Purchase money security interests perfected within this time frame have a priority that relates back to the date that the security interest attached, regardless of the date that the security interest was perfected. If the financing statement is not filed (or a lien is not noted on a motor vehicle title in the case of titled vehicles) within twenty days after the borrower receives possession of the property constituting the collateral, what would otherwise be a protected transaction may now be subject to attack by the bankruptcy trustee. This attack could result in the lender losing its lien rights in the collateral.