Interpret the law of secured transactions Essay Example | Topics and Well Written Essays - 500 words - 1

Interpret the law of secured transactions - Essay Example According to common jurisdictions, the lender in this case who is the First Savings Bank can accept intangibles as security for loans borrowed. This mostly applies where the accounts receivable are traded to the creditor just like in the case of Money Games Incorporation. According to the scenario, the accounts receivable acts as collateral whether the financial statement is filed or not (Miller, 2011). A security interest arises in exchange of the loan whereby the debtor agrees that the secured party may take collateral owned by the debtor if he or she defaults in the payment of the loan (Miller, 2011). Security agreements are contracts according to the law of business (Legal Information Institute, 2000). The collateral interest of the bank vests upon the signing of the guarantee contract. In this case, the bank security is attached. However, it has not perfected its collateral interest. In most situations, perfection can be easily achieved through filing of a financial statement. This document should include the signature of the debtor, a brief description of the collateral item and addresses of both the creditor and the debtor (Cheeseman, 2009). In normal circumstances, when the debtor delivers the note and executes the security agreement, the bank swiftly authorizes for liberation of the funds that are being borrowed. When the money is released to the debtor, then the bank’s security is attached since, it has executed a security agreement that describes the collateral and has also offered valuable security that applies to the loan. The bank is required to perfect its security interest and its claim against the accounts receivable which subordinates to the claims against the accounts receivable. This is because the bank’s security interest attaches from the agreement that secures the payment of the debt. For instance, the beneficiary of the security interest has certain rights in