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What is a UCC-1?

A UCC-1 is an instrument that is filed (typically at the county and/or State level) by a creditor to secure assets of a borrower. The assets that are secured by the UCC-1 are specifically listed on the UCC-1 form. The easiest way to understand what a UCC-1 is, is to think of it as a mortgage filed on specific assets where a mortgage cannot be recorded. The UCC-1 has a few different functions. First, it will put everyone on notice that the borrower has an outstanding obligation to the creditor so a future potential creditor would know about it. Likewise, in the event the borrower attempted to sell the secured assets without advising the creditor, the potential purchaser would do a lien search and discover that the assets were encumbered by a lien. In addition to securing the assets, the UCC-1 would allow the creditor to sell the secured assets in the event the borrower does not pay or otherwise defaults on its obligations.

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