In most states, the amendments to Article 9 became effective July 1st. While the changes are not major revisions to the statute, the changes to filing and searching on individual names have been modified and are important to keep in mind from both a filing and searching perspective.
When preparing an initial financing statement or amending a debtor name, make sure to review which alternative (Alternative A or Alternative B) the state you are making your filing in has adopted. The unexpired driver’s license or state issued ID is the source document for the correct spelling of an individual’s name in both Alternative A and Alternative B states. In states that have adopted Alternative B, you may instead use the surname and first personal name or the individual’s “correct” name. Alternative B outlines three options for the individual debtor name, whereas Alternative A is stricter- calling for the unexpired state issued driver’s license or unexpired state issued ID. In states where the amendments to Article 9 are effective, you can make sure that you have the right name on your financing statement by using the correct source document, if applicable.
For the next five years, searching UCCs for individual debtor names will likely require searching multiple names, since the unexpired driver’s license and unexpired state issued ID is the new source document in most states. A few exceptions to this are Texas,Tennessee and Virginia, where legislation was passed several years ago instructing filers and searchers to consult the driver’s license for the correct name of an individual when filing a financing statement.
So, why do additional searches on individual debtors? It is important because there may be financing statements in the public record with individual names that do not match the name on the driver’s license (pre-Amended Article 9), yet meet the legal sufficiency requirement because they were filed before the amendments to Article 9 became effective. Therefore, limiting your search to the name as it appears on the driver’s license after July 1st could result in not finding effective financing statements.
IMPORTANT NOTE: As has always been the case, UCC Article 9 does not apply when searching for statutory liens. Therefore, limiting a search to only the name as it appears on a driver’s license may result in missing active federal tax liens, state tax liens and judgment liens filed against an individual debtor where the name is spelled differently from what appears on the driver’s license.
When conducting a search on an individual debtor, consider the following practices:
- To find financing statements filed pre and post Amended Article 9, use broad searching techniques as well as the name as it appears on the unexpired state issued driver’s license or unexpired state issued identification card.
- Determine if the individual’s name has changed and search on any former names and variations on the name in addition to the name the individual currently uses.
- Consider searching with and without a middle name and/or middle initial.
In states where the Article 9 Amendments are effective, keeping in mind the new individual name requirements when preparing filings, along with remembering to search under both the old and new individual name requirements, will help to ensure that your new filings are properly perfected and that your due diligence is thorough and complete.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.