For most of us, getting a loan or lending out money (if we are lucky to have enough of our own) seems straightforward. Someone lends out money, the other person — hopefully — pays it back in a timely manner. End of story, right? Wrong. It is actually far more complex. The true nature of money, financial obligation and complex legal documents like the Uniform Commercial Code all play a part. So what does this mean for each one of us? How does language like “all rights reserved without prejudice” or terms like UCC-1-103 actually apply to our lives?
In every transaction where money changes hands in the form of a loan, something has to serve as collateral securing the loan. Usually taking the form of physical objects of easily identifiable value like cars, houses and the like, these assets are what secures the loan — what someone will lose if they fail to pay back the loan.
The person lending money is referred to as the secured party creditor when they have established interest in the collateral identified in a financial agreement. This is the individual who has the right to the collateral should the debtor have a problem paying back their loan. The secured party creditor is, in essence, the first one in line when something goes wrong.
But how does one become a secured party creditor, and what is the Uniform Commercial Code? Published as far back as 1952, the UCC provides guidelines on how commerce should be conducted. Among other things, it helps iron out the discrepancies and differences between individual state laws that pertain to commerce. While not a piece of civic law, the UCC does help guide the application of laws and codes of commerce in the United States. It also helps establish guidelines on who gets what when a loan or other financial dealing goes south and someone has to collect.
A proper UCC filing is the route to becoming an established secured party creditor and thus establishing your place in line in any business deal where money is changing hands. Article 9 in particular delineates how to establish interests in personal property to secure debts.
This can have applications beyond just making sure you get your money back on an investment. There is a whole realm of applications of UCC regulations that have been applied to the relationship that an individual has with the US government.
In this understanding of the UCC, every individual is considered to be a corporation in relation to the federal government, and is treated as such in all dealings of commerce. However, filings under the Universal Commercial Code, such as UCC-1-103 and UCC-1-308, can be used for an individual to attempt to gain status as the secured party creditor over their own corporation — that is to say, the on-paper entity the government deals with in commercial transactions with an individual — thus placing themselves in a position of greater control over financial dealings with other individuals, and the government. People seek protection under UCC-1 filings to improve their position in financial matters ranging from foreclosures to fees, bills and the like. Some have even sought protection under the UCC to eliminate credit card debt.
It can all get a little confusing for those who haven’t spent a lot of time in a law library, and the process of becoming your own secured party creditor is not without risk. Improper UCC fillings can end in felony convictions, and should be approached with caution. For those willing to sort through the intricacies of the process, you can emerge in greater control of your own financial future.