This is the second in a series of blogs discussing the creation of and enforcement of liens on personal property in Nebraska.
A security interest is created by a written agreement between the owner of the collateral and the lender/secured party. Typically the borrower grants a security interest in the borrower’s property to secure the payment of the borrower’s debt to the lender. A non-borrower can also grant a lien in the non-borrower’s property to secure a lender’s lien to the borrower. A UCC security interest is created with the written agreement of the owner of the collateral. There are special statutes that give certain types of creditors the right to file a lien against an owner of collateral based on the type of services provided to the owner. These “statutory liens” will be covered in a later blog. Liens on motor vehicles are perfected by a filing on the title to the vehicle. Vehicle liens will be covered in a later blog.
To be enforceable against third parties, the lender’s security interest has to be filed in the appropriate filing office (or in some cases the lender needs to take possession of the collateral). In most cases, the appropriate office to file a UCC financing statement is the office of the Nebraska Secretary of State. There are specific rules that determine the location of the filing office. If the debtor is an individual, the lien has to be filed in the state where the debtor resides. If the debtor resides in Nebraska, the correct office is the Nebraska Secretary of State for most types of property. If the debtor is a corporation or limited liability company (a “registered entity”) the proper filing office is the state in which the corporation or limited liability company is chartered. If the debtor is a Nebraska corporation, the correct filing office is the Nebraska Secretary of State. If the debtor is a Delaware limited liability company, the correct filing office is the Delaware Secretary of State’s office.
When the filing office accepts the filing and the lien is “perfected” which means that the lien is entitled to be enforced not only against the borrower, but also against third-parties, such as subsequent lienholders.
A security interest is valid for five years from the date of the filing of the lien. The lender can continue the effectiveness of the lien by filing a continuation statement within six months before the expiration of the five years from the date of initial filing. A lien can be continued from time to time as long as each continuation statement is filed within the prescribed time period.
The next blog will discuss the effect of selling secured property.