perfection of security interest

In secured transactions law, the process whereby a security interest is protected, as far as the law permits, against competing claims to the collateral, which usually requires the secured party to give public notice of the interest as by filing hi a government office (e.g. in office of Secretary of State).

Perfection of a security interest deals with those steps legally required to give a secured party an interest in subject property against debtor's creditors. Bramble Transp., Inc. v. Sam Senter Sales, Inc., Del.Super., 294 A.2d 97, 102.

The minimum meaning of this term in connection with a security interest is that the secured party has done whatever is necessary in the way of giving notice to make his security interest effective at least against lien creditors of the debtor. Depending upon the type of collateral and the method of perfection, it may mean more; e.g. it may mean that the interest is good even against all purchasers. The methods for attaining perfection are stated in U.C.C. Sections 9-302 through 9-306.

In most cases the secured party may obtain perfection either by filing (i.e. with Secretary of State) or by taking possession of the collateral. When the collateral is held by a bailee who has not issued a negotiable document of title, perfection by notification is possible; e.g. the secured party may obtain perfection by notifying the bailee of the secured party's interest. For a few special situations the Code provides that a security interest is perfected without any of the above actions on the part of the secured party. Such perfection is called automatic perfection, or perfection by attachment