What do you do when a contractor messes up and doesn’t fess, a client refuses to pay, or a UCC violation otherwise occurs? You’ve gotta lien into it! In this UCC filing guide, we’ll break down what UCC violations and liens are, how to file, and why you might want to consider them.
Even though most states will have different lien/UCC filing procedures, the general process should be the same. So, read on!
What Is a UCC Filing or Violation?
A UCC filing (or a lien for short) is a filing that a business owner or customer can make to satisfy an unpaid debt. or to announce a collateral commitment to help ensure getting a loan that you want to make. (i.e., if you’re going to put up your house or car to help a bank feel comfortable lending you money, you would file a lien against your car or home.)
You Can File for Two Types of Liens.
- A UCC filing that grants rights to specified assets. That means equipment, houses, etc…
- A UCC filing that grants rights to every aspect of a business. Lenders like these liens, but they’re risky for the borrower.
One interesting thing about liens is that they are typically more attached to the asset than the person who initially files them. So, for example, if you buy a house with a lien filed against the previous owner, you would be inheriting that debt during the purchase.
If you find yourself needing to file UCC claims frequently, then consider using software like this system to speed things along.
Finally, UCC legal forms are good for five years, so if you’re offering collateral through a lien, then be sure to renew that lien every 4-5 years.
So, What Do You Need to Make a UCC Filing?
So, you’ve decided that you want to move forward with a lien to either get paid or to take out a loan. What information do you need to provide? Well, your bank will typically ask you for three things when you’re making your UCC filing.
Your Name and Address
You’ll need to give the bank some way to contact you if the person you’re filing for or against settles/you default on your loan. The bank will also need your information to send you updates on the filing process.
The Lender’s Name and Address
Whether this means someone you need to collect payment from or the bank that you’re asking to borrow money from, you need the contact information of the party of the other end of the UCC filing. Without this information, your bank will not be able to notify them that they own money or that you’re putting an asset up for collateral.
A Description of the Collateral or the Services With Uncollected Fees
To top everything off, you will need a description of the car, house, etc., that you’re putting on the line. This information gives lenders peace of mind. Alternatively, you’ll need a description of the service you performed that was left unpaid. (Think fence building, home repair, etc.)
Wrapping Up This Filing Guide: How to Remove a UCC Filing/How to Stay up to Date
The only way to remove a UCC filing against you or against an asset you own is to give up the asset/pay off your debt. Additionally, your bank can forget to remove a UCC lien that’s been paid. If you have documentation proving lien completion, provide it to your bank along with a UCC-3 form to prompt termination.
Additionally, you should periodically check in with your bank to see if there’s a UCC lien filing against you that you haven’t been notified about.
As always, if you would like to learn more about business solutions like we talked about in this filing guide, keep reading our blog!