• Pay Attention to Financing Statement Details
  • March 7, 2018 | Author: Bryan M. Mull
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • A recent Bankruptcy Court decision from the Southern District of Georgia demonstrates how small errors in financing statements can result in dire consequences for lenders. This case arises out of a lender’s $18,000 loan to an individual debtor to finance the purchase of a fertilizer spreader for his farm. The parties executed a security agreement granting the lender a lien on the equipment and thereafter the lender filed a financing statement in the appropriate state office. After the debtor filed a voluntary Chapter 12 bankruptcy petition, the lender timely filed a proof of claim asserting a secured claim against the debtor. The debtor filed an objection to the lender’s claim, contending that the lender failed to correctly identify the debtor on the financing statement and, thus, the lender’s claim was unperfected and wholly unsecured. Under Section 3-503 of the UCC, as adopted in Georgia, if an individual has a state-issued unexpired driver’s license, a financing statement against an individual debtor sufficiently provides the debtor’s name “only if the financing statement provides the name of the individual which is indicated on the driver’s license.” The debtor argued that because the lender failed to list his middle name on the financing statement, the financing statement failed to sufficiently identify his name. The lender argued that the financing statement was proper because the debtor’s name without his middle name was also signed on the debtor’s driver’s license and, thus, the financing statement matched one of the debtor’s names on the driver’s license. The court rejected this argument, finding that a printed name trumps a signed name on a driver’s license. Maryland has adopted UCC Section 3-503. This decision should remind lenders of the need to take special care when preparing financing statements. For individual debtors, lenders should insist on reviewing the debtor’s driver’s license or other state-issued identification. Please contact Bryan Mull with any questions concerning this topic.