What Is a UCC Filing?

What Is Article 9 of the Uniform Commercial Code (UCC)? 

The Uniform Commercial Code is a set of standardized laws that govern commercial transactions across the U.S. Article 9 of the Uniform Commercial Code (UCC) governs secured transactions in personal property. It allows creditors to secure payment by establishing a security interest in a debtor’s assets, such as accounts receivable, inventory, or equipment, helping protect the creditor’s right to collect if the debtor defaults. 

What Is a UCC Filing? 

A UCC filing is a document filed with the Secretary of State that serves as public notice of a creditor’s security interest in specific collateral owned by a debtor. 

What Is the Purpose of a UCC Filing? 

The purpose of a UCC filing is to give public notice that a creditor has a security interest in a debtor’s personal property such as inventory, equipment, or accounts receivable. UCC filings help: 

• Protect the creditor’s rights if the debtor defaults 
• Establish priority over other creditors 
• Ensure transparency in commercial lending and credit transactions 

Is a UCC Consensual or Statutory? 

UCCs are consensual, meaning the filing requires the debtor’s consent or permission. Consent is typically granted through a Security Agreement, which includes a granting clause, whereby the debtor gives the creditor a security interest in specific collateral. 

Note, having your customer sign an agreement that is missing a granting clause means your customer isn’t providing consent for you to file the UCC on the collateral. 

UCC Filings vs. Other Types of Liens

UCC filings under Article 9 create consensual liens agreed to by both creditor and debtor through a security agreement. This sets them apart from statutory liens, like mechanic’s liens or tax liens, which arise by operation of law and do not require debtor consent. Consensual liens offer more flexibility in defining collateral & terms and allow creditors to file preemptively.

Unlike judicial liens, which require a lawsuit and court judgment, UCC filings allow you to perfect a security interest without going to court, making them faster and more cost-effective. Understanding how UCC filings compare to other lien types helps you choose the best tool for protecting your interests. 

Are There Other Names for a UCC Filing? 

A UCC filing is frequently referred to as a UCC-1 or UCC-1 Financing Statement. Though, there are some additional names which include UCC statement, secured transaction filing, security interest filing, lien filing or UCC lien. 

Who Is Protected by UCC Filings? 

A properly perfected security interest (or UCC filing) protects any party extending credit to its customers. Distributors, equipment rental companies, material suppliers, financial institutions, leasing companies, and factoring companies would all benefit from the protection of UCCs.  

How Will a UCC Filing Impact or Affect My Relationship with My Customer? 

When handled professionally, a UCC filing doesn’t negatively impact your customer or the relationship with your customer. In fact, it’s a common and accepted business practice. Most customers understand a UCC filing is simply a way to protect your financial interest in the goods or services you’ve provided. 

It’s not a reflection of distrust, it’s a tool to secure your position, just like a mortgage secures a lender. Being transparent and explaining the purpose of the filing (especially during the credit application process) helps maintain trust and avoid surprises. 

How Can I Explain the UCC Filing to My Customer? 

We’ve drafted a letter/email you can send to your customer which helps explain UCC filings. (You can view that letter here.) The letter explains you file UCCs as part of your credit granting process, the UCC won’t hurt your customer’s credit rating and it doesn’t cost your customer anything. 

Will a UCC Filing Really Help Me Get Paid? 

Yes, a UCC filing can significantly improve your chances of getting paid by securing your rights to the customer’s collateral.  

An analysis of 2024 Chapter 11 bankruptcy plans revealed secured creditors’ median rate of recovery was 98%, while unsecured creditors’ median rate of recovery was 21%.  

If your customer defaults or files for bankruptcy, a properly filed UCC-1 gives you priority over unsecured creditors, meaning you may be first in line to recover payment through repossession or liquidation of assets like inventory, equipment, or receivables. 

It doesn’t guarantee payment, but it turns you from an unsecured creditor into a secured one, which gives you powerful leverage, especially in high-risk or financially unstable situations. 

Read how one secured creditor leveraged its UCC filing to recover $95,000. 

What Is Default? 

Under Article 9, default is generally defined as the failure of the debtor to fulfill their obligations under the security agreement. While Article 9 does not provide a specific definition of default, it gives secured parties the right to enforce remedies when a default occurs and the exact definition of default is typically outlined in the security agreement itself. 

Common Examples of Default: 

• Failure to make required payments on time 
• Breach of specific loan or credit terms (e.g., exceeding credit limits or using collateral improperly) 
• Bankruptcy or insolvency of the debtor 
• Misrepresentation of financial information 
• Unauthorized sale or disposal of collateral 

What Is Right of Repossession? 

The right of repossession under Article 9 of the Uniform Commercial Code (UCC) allows a secured creditor to take back possession of collateral when a debtor defaults on their obligation. Repossession can happen without a court order if it can be done without breaching the peace (i.e., no force, threats, or trespassing). 

The right of repossession is a powerful tool that gives secured creditors a direct path to recovering losses when a customer defaults—but it must be exercised carefully and lawfully. 

Post-Default Remedies Beyond Repossession 

When a customer defaults, repossession is only one of several remedies available under Article 9 of the Uniform Commercial Code. A secured creditor also has the right to dispose of the collateral in a commercially reasonable manner, either through public auction, private sale, or another method allowed by law. Before doing so, the creditor is typically required to provide advance notice to the debtor and any other known secured parties. The proceeds of the sale are then applied to the debt, with any surplus returned to the debtor. These rights give secured creditors powerful tools to recover losses, but they must be exercised carefully and in accordance with Article 9 to avoid legal complications. 

Are there Different Types of UCC Filings? 

Yes, there are different types of UCCs. The two primary types of secured transactions under Article 9 are Blanket filings and Purchase Money Security Interest (PMSI) filings. Additional filings include consignment, bailment, tooling, warehousing arrangement and installments or promissory notes. 

How to File a UCC 

Steps for Establishing a Security Interest 

Generally, to establish a security interest, you must execute a Security Agreement and then file a UCC-1 with the appropriate state filing office (e.g., Secretary of State).  

Contents of a Security Agreement 

A Security Agreement should include:  

• The name & address of the debtor 
• The name for an organization must be the name as it appears in the public organic record 
• The name for an individual, depending on the state, should be the name as it appears on the unexpired driver’s license 
• A granting clause 
• A collateral description 
• Reference to governing law 
• The date of the agreement 
• Signatures from authorized individuals 

Contents of the Financing Statement 

Article 9-502 clearly identifies the information that is to appear in the Financing Statement: the name of the debtor, the name of the secured party and the collateral description. 

(a) [Sufficiency of financing statement.] Subject to subsection (b), a financing statement is sufficient only if it: 

(1) provides the name of the debtor; 

(2) provides the name of the secured party or a representative of the secured party; and 

(3) indicates the collateral covered by the financing statement. 

The Role of Articles of Incorporation and Corporate Certificate 

Articles of Incorporation are required to verify an entity’s legal name and to verify jurisdiction. In compliance with UCC 9-503(a), when the debtor is a registered organization, creditors should rely on the information found on the public organic record (e.g., Articles of Incorporation). 

Using an incorrect name, such as a trade name, abbreviation, or misspelling, can render the UCC filing ineffective and jeopardize the secured party’s interest.  

The Articles also confirm the debtor’s state of incorporation, which determines the proper jurisdiction for filing the UCC-1, typically with the Secretary of State. In addition, the Articles can help verify the business is a valid legal entity in good standing, which is useful during credit evaluations and due diligence. While Articles of Incorporation are not submitted with the UCC filing itself, they are essential for ensuring the filing is accurate and enforceable. 

Individual Debtor Name Standards 

Under the 2010 UCC Amendments, states chose between Alternative A (the “Only If” rule) and Alternative B (the “Safe Harbor” rule). If the debtor is an individual, creditors must first look to the state legislation.  With the 2010 Amendments, each state had to decide whether they would implement “Alternative A” or “Alternative B.” 

• Alternative A: if the debtor holds an unexpired driver’s license, the Financing Statement must list the debtor’s name as it appears on the unexpired driver’s license. (If the debtor does not have a driver’s license, the Financing Statement should list the “individual name” of the debtor or the debtor’s surname and first personal name.) 
• Alternative B: the debtor’s driver’s license name, the debtor’s actual name or the debtor’s surname and first personal name may be used on the Financing Statement. 

The Importance of a Reflective Search 

A reflective UCC search confirms that a UCC filing was recorded. The reflective search returns a jurisdictional report by debtor name reflecting all UCC filings through the date of your recorded UCC filing. This search also lists previously secured creditors by filing dates to help determine your filing position. 

Common UCC Mistakes Could Eliminate Your Security 

The accuracy of your Security Agreement can make or break your properly perfected security interest. Compliance with Article 9 of the Uniform Commercial Code must be precise. Avoid these common mistakes in your agreement: 

• Listing your customer’s name wrong  
• Failing to include the granting cause  
• Not clearly identify the collateral 
• Forgetting to date and sign the agreement 
• Neglecting to reference governing law 

Failing to Complete the Proper Forms 

Using the correct forms is essential to ensure the filing is legally effective and properly recorded. The most common forms are the UCC-1 for initial filings and the UCC-3 for amendments, continuations, assignments, or terminations.  

These standardized forms are designed to meet the requirements of the Uniform Commercial Code and using them helps ensure all necessary information is included. Filing the wrong form, forgetting to file attachments, or omitting required details can lead to rejection by the filing office or result in an ineffective filing that fails to perfect the security interest.  

Terminate the UCC Filing Once You’ve Been Paid 

When should you terminate the original UCC Financing Statement? Section 9-513 of the Uniform Commercial Code states that a secured party must terminate a UCC filing within 20 days of a request from the debtor if any of the following exist: 

• There is no obligation secured by the collateral and no indication there will be a future obligation 
• The financing statement covered consigned goods that are no longer in the debtor’s possession 
• The debtor never authorized the filing of the original financing statement 

Otherwise, the UCC filing will remain active until the 5-year lapse date, which can cause financial complications between the debtor and their bank. As a best practice, terminate your UCC filings in a timely manner. 

What Happens if I Accidentally Terminate My UCC? 

If you accidentally terminate a UCC, you’ve effectively released your security interest in the debtor’s assets and lost your place in line. Unfortunately, a terminated filing can’t be revived. To protect your rights, you’ll need to file a new UCC-1. Just know that any creditors who perfected their interest before your new filing will now have priority. 

Can UCCs be Filed in Other Countries? 

Secured transactions are available in other countries, though they aren’t referred to as UCCs. In Canada, Australia and New Zealand the PPSA or PPSR are the equivalent to the U.S.’s UCC. In Mexico, creditors pledge collateral under the RUG.   

Are there Alternatives to Filing a UCC? 

Yes, there are alternatives to filing UCCs if you're a business extending credit to customers, but each comes with its own advantages, limitations, and risk profiles. A few common options include personal guarantees, credit insurance, letters of credit, or cash in advance. 

Personal Guarantees 

You can require the business owner or a third party to personally guarantee the debt. This gives you the right to pursue their personal assets if the business defaults, but it doesn’t create a security interest in specific property like a UCC filing does. 

• Pros: strong incentive for repayment and useful when the business has limited assets 
• Cons: still unsecured unless supported by collateral and recovery can be difficult if guarantor lacks assets 

Personal Guarantee Enhanced by UCC 

A properly perfected security interest can reduce risks associated with personal guarantees. 

• A UCC filing gives you an interest against the assets of the business, not just the individual. If the business is a registered entity or partnership, chances are the assets of the business are much more plentiful than the assets of the individual. 
• UCC filings create a system that establishes the priority of creditor claims, without going to court and suing each other. This minimizes the time and costs involved. 
• With UCC filings, you know who has a stake in the debtor’s assets (collateral), because UCCs are registered in the public record. 

Credit Insurance 

Trade credit insurance protects your receivables against customer non-payment due to insolvency, slow pay, or political risk (for international customers). 

• Pros: risk is transferred to the insurer and can protect large portfolios of receivables 
• Cons: can be costly and claims may be denied based on policy terms 

UCC Filings vs. Credit Insurance 

Secured vs. Insured: why not both? Let’s compare: 

	UCC Filings	Credit Insurance	UCC Filings & Credit Insurance
Fixed Cost: regardless of your customer's financial profile
Mitigates Risk: reduces bad debt write-offs and improves DSO
Security Interest: grants you rights to the collateral used to secure the line of credit
Payment Priority: secures your spot in the payment line if your customer defaults or files for bankruptcy
Identifies Risks: actuaries provide analysis to identify potential losses
Transfers Risk: risk is transferred to the insurer's balance sheet
Public Record: establishes a public acknowledgement of the financial agreement

Letters of Credit 

Issued by a bank on behalf of your customer, a letter of credit guarantees payment if the customer defaults. 

• Pros: strong financial backing from a third party and common in international trade 
• Cons: complex and expensive, and often only used in large transactions 

Cash in Advance 

Requiring payment upfront or on delivery limits your credit exposure entirely. 

• Pro: virtually eliminates credit risk 
• Cons: not always feasible in competitive markets and may limit customer growth or sales 

How Is a UCC Filing Better than a 503(b)(9) Claim? 

UCC filings offer stronger proactive protection than relying solely on 503(b)(9) claims in the event of a customer’s bankruptcy. A properly filed UCC-1 establishes a secured interest in the debtor’s assets, which gives you priority status and the ability to recover from collateral or proceeds. This protection begins at the time of filing and applies to a wide range of assets, including inventory, equipment, and accounts receivable, regardless of when they were delivered.  

In contrast, a 503(b)(9) claim is limited to goods received by the debtor within 20 days prior to filing for bankruptcy and does not apply to services or older unpaid invoices. While 503(b)(9) claims do offer administrative priority over unsecured claims, they are not secured and must go through the bankruptcy court’s approval process, often facing delays or objections. UCC filings provide more certainty, broader protection, and better positioning in a bankruptcy scenario, making them a more effective and reliable tool for securing payment. 

Managing UCCs and Benefits of Commercial Agencies 

At NCS Credit, we know that filing a UCC is just the beginning. Managing your UCC portfolio is critical for long-term protection. Each filing must be tracked for expiration, continuations, amendments, debtor name changes, and more. A lapse in coverage or an error in the filing details can jeopardize your secured position and leave your business exposed. That’s why proactive management is critical to maintaining your rights as a secured creditor. 

Partnering with a commercial agency like NCS Credit gives you the tools and support to stay ahead. We don’t just file, monitor, manage, and ensure your UCCs stay compliant throughout their lifecycle. Our team leverages decades of experience, jurisdictional expertise, and automated tracking systems to help you avoid costly oversights. Whether it’s maintaining perfection, tracking debtor activity, or advising on amendments and terminations, we handle the heavy lifting so you can focus on growing your business, with the confidence that your security interests are protected.