Why Does a Creditor File a Uniform Commercial Code-1 Form?


Quick Answer

A creditor files a Uniform Commercial Code-1 form, or UCC-1 financing statement, to secure an interest in the property of a debtor, according to the Cornell University Law School Legal Information Institute. The form is designed to give official notice of interest, and it must be filed with the state.

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Full Answer

In commercial transactions, a creditor often requires collateral from a borrower to secure a loan, notes the Cornell University Law School. In the event the debtor defaults on the loan, the lender uses the interest in the collateral on the loan to satisfy the debt. The UCC is a body of rules and regulations that governs commercial transactions and is designed to promote predictability and efficiency of business activities across jurisdictions, explain Nolo.

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