Under secured transactions, which party generally has priority over a lien creditor when there is a perfected and attached creditor?

Under secured transactions, which party generally has priority over a lien creditor when there is a perfected and attached creditor?

• A. Buyer in Ordinary Course
• B. Perfected and Attached Creditor
• C. Lien Creditor
• D. General Unsecured Creditor

Answer: (B)

The key idea is priority among claims to collateral in secured transactions. When a security interest has both attached to the collateral and been perfected, that secured party is generally ahead of lien creditors who claim a right to the same collateral by judgment or statutory lien. Perfection provides public notice of the secured party’s claim, strengthening the secured party’s position against third-party claims. So, with a perfected and attached security interest, the creditor with that perfected interest typically takes priority over a lien creditor. (There are specific exceptions and nuances, but the general rule follows this principle.)

The key idea is priority among claims to collateral in secured transactions. When a security interest has both attached to the collateral and been perfected, that secured party is generally ahead of lien creditors who claim a right to the same collateral by judgment or statutory lien. Perfection provides public notice of the secured party’s claim, strengthening the secured party’s position against third-party claims. So, with a perfected and attached security interest, the creditor with that perfected interest typically takes priority over a lien creditor. (There are specific exceptions and nuances, but the general rule follows this principle.)