NJ State UCC Filing: What You Need to Know About Filing a UCC Lien

UCC Filing refers to the filing of a UCC-1 financing statement, a document submitted to the Division of Commercial Recording. UCC is an acronym for Uniform Commercial Code, a set of laws that seek to universalize policies that govern transactions across the United States. Under the Uniform Commercial Code, creditors file the UCC-1 financing statement to advise the government and potential creditors of the interest they, the creditor, have in the debtor’s business or assets. Learn what a UCC filling can do for you.

The Most Common Types of UCC Filing

UCC liens are the collateral that secures lenders’ investments. One type of UCC-1 filing includes a lien against specific collateral, meaning the creditor’s investment in the business is secured with a particular asset. The other type of UCC-1 filing is a blanket lien, meaning if the debtor defaults or enters bankruptcy, all his or her assets can be used to compensate the lender. Generally, equipment financers take liens against particular assets they have financed.

Creditors file UCC liens against the assets a debtor agreed to use as collateral in his or her security agreement. Usually, the liens are filed on inventory, equipment, vehicles, property, letters of credits and commercial instruments.

The Primary Benefits of UCC Filing

The benefits of UCC filings to title, legal and lending professionals are twofold.

Before entering into a financing agreement with a business, you can conduct a UCC filing search to view past UCC filings in the client’s credit history. From this information, you can glean what collateral the client has available and learn more about the state of their credit. A UCC lien that is still active shows what your client has available as collateral to secure their debt to you. This way, no two creditors will expect to be repaid with the same asset should a debtor default on payments or enter bankruptcy. The UCC lien is your way of securing your right to be compensated individually and before others.

The second benefit of a UCC filing comes after the financing agreement has been reached. Your UCC filing with the Division of Commercial Recording secures your financing so that you will have recourse if a client fails to pay their debts. As mentioned, depending on the type of liens your UCC filing secured, you’ll either be compensated with specific assets or with assets from your client. Depending on the state in which the financing agreement was conducted, some of the client’s assets may be exempt from the liens, and this is detailed in your state’s laws on bankruptcy.

The Practical Side of UCC Filing In NJ

UCC filings in New Jersey go through the New Jersey Department of the Treasury’s Division of Revenue and Enterprise Services. UCC-1 financing statements are submitted to secure debt, and then form UCC-3 is used for amendments to a UCC-secured financing agreement.

Types of amendments to UCC statements can include:

  • providing a continuation of the maturity date,
  • changing the conditions or information of the original statement,
  • terminating the debtor’s obligation,
  • assigning the obligation to another party, or
  • partially releasing the collateral listed.

To file your UCC-1 financing statement or amendments in New Jersey, all filings must be submitted electronically with proper fee.  In order to remove a UCC lien, the creditor can amend the statement to release the debtor from the obligation. This way, the debtor is free of liens and debt, looking more appealing as an investment to other financing companies.  Remember that UCC-1 filings are good for 5 years.  If lien is still active after 5 years a UCC-3 (continuation) must be filed before the UCC-1 expires or it will lapse.

Securing Your Future with UCC Filing

Financing always involves risk. You invest wisely, but you need a safe way to make sure you are providing capital to the right clients and that you’ll be protected in case a client defaults on payments or enters bankruptcy. Conducting a UCC filing search informs you of the liens a client may have against them, as well as what collateral they have available to secure their debt to you.

Once your search is conducted and you’ve entered into a financing agreement with a client, a UCC-1 financing statement secures your debt with either particular assets or with any and all assets the client has available.

To get started with UCC filing, contact a qualified professional to handle all your UCC needs, including amendments, assignments, terminations and releases.

Sources:

UCC Filings, National Association of Secretaries of State

What Is a UCC Filing? (and Why You Need to Know), Meredith Wood

What is a UCC-1 Filing? How Do UCC Liens Work?, ValuePenguin

What is a Secured Debt?, Bret. A. Maidman, Attorney

What Can Creditors Do If You Don’t Pay, Bethany K. Laurence, Attorney