by Bari Gambacorta

Several proposed amendments to UCC Article 9 become effective on July 1, 2013. These changes affect how secured creditors will perfect their security interests in a debtor’s collateral. Of utmost significance are changes to the rules about determining the correct name of the Debtor, both where the debtor is an individual and where the debtor is an entity. Because an individual typically does not use a single name for all purposes, sometimes using nicknames or abbreviated names, determining the correct name to use on a financing statement can become more complex. Even a minor variation – i.e. Chris vs. Christopher or L. Henry Smith vs. Lester Henry Smith or a simple misspelling – can result in improper indexing of a security instrument.

Individual Debtors: The Review Committee formed by the American Law Institute and the Uniform Law Commission proposed two (2) options for determining the correct name of the debtor in order to perfect security interests – the “only if” and the “safe harbor.” In states that enact the “only if” provision, the name of the Debtor as it appears on an unexpired state driver’s license or equivalent non-driver identification card is the name that should appear on the financing statement. Stated another way, the name on the financing statement will be sufficient only if it is the name that appears on the debtor’s unexpired state driver’s license. In the absence of an unexpired state-issued drivers’ license or non-driver equivalent, the secured party may use the debtor’s personal first name and surname. Where a Debtor has two valid drivers’ licenses, the name on the most current license prevails. New Jersey has adopted the “Only If” option (N.J.S.A 12A:903(a)(4)). The “Only If” amendment is currently under consideration by the Pennsylvania Senate Judiciary Committee, having already passed the House of Representatives. The vast majority of states have either enacted or are considering the “only if” provision.

Where the “safe harbor” provision is adopted, how the name of the debtor is determined is a bit broader. Pursuant to the “safe harbor”, a financing statement sufficiently names a debtor if it includes (1) the name of the Debtor; (2) the surname and first personal name of the Debtor; or (3) the Debtor’s name as it appears on an unexpired state drivers’ license. The “safe harbor” has been adopted in Delaware, and a handful of other states.

Organizational Debtors: For purposes of Article 9, the definition of “registered organization” has been modified to reflect that an organization is “registered” if it is formed or organized solely under the law of a single state or the United States government by the filing of a “public organic record” with, the issuance of a “public organic record,” or by the enactment of legislation by the state or United States. See N.J.S.A. 12A:9-102(70). A “public organic record” is the publicly available document filed with or issued by a state or other governmental entity to form or organize an organization, and any amendment thereto. For an organization formed by legislation, the legislation itself is the “public organic record”. See N.J.S.A. 12A:9-102(67.1(A) and 67.1(B)).

Transition Period: While the changes to Article 9 become effective on July 1, 2013, there is a 5-year transition period. See N.J.S.A. 12A:9-801, et seq. Accordingly, creditors do not need to immediately amend their filed UCC Financing Statements. Rather, the financing statements can be amended as they come up for renewal.

For more information contact Bari Gambacorta at Stark & Stark by e-mail at or by phone at 609-896-9060.

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