Question

On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment with funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper's existing and after-acquired equipment. On June 21, Harper was petitioned involuntarily into bankruptcy under Chapter 7 of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern filed the financing statement. Which of the parties will have a superior security interest in the equipment?

A. The trustee in bankruptcy, because the filing of the financing statement after the commencement of the bankruptcy case would be deemed a preferential transfer.
B. The trustee in bankruptcy, because the trustee became a lien creditor before Eastern perfected its security interest.
C. Eastern, because it had a perfected purchase money security interest without having to file a financing statement.
D. Eastern, because it perfected its security interest within the permissible time limits.

Answer 1

The correct answer of the following question is option D.

Step-by-step explanation:

They have a superior security interest because they completed its interests with in the time limits. Under the Uniform Commercial Code (U.C.C.), to a best security interest, a creditors have ten days from the date and the time of the sale of equipment for better security interest by completing a financing statement have filed within ten days time limit, bur they has a valid and a best security interest in the equipment and after that, obtained the equipment but the fact was that the bankruptcy were filed 2-days earlier.