Question

Chris exchanges his computer for an updated model. The seller of the original computer retained a security interest in the original computer for credit extended to Chris. The debt on the original computer has not been fully paid by Chris. If the seller perfected their interest in the original computer, what is the seller's status with respect to the new computer?

Answer 1

If Chris exchanged his computer and the seller has a perfected security interest in the original item, this interest may continue in the new computer under secured transaction laws. However, the seller must take action to maintain this perfected status.

Step-by-step explanation:

When Chris exchanges his computer for an updated model, and the seller retained a security interest in the original computer, the legal status of the seller's interest in the updated computer can vary based on the jurisdiction's laws regarding secured transactions. Generally, in secured transactions under the Uniform Commercial Code (UCC), if the seller perfected their security interest in the original item, they might maintain that interest in the new item if the exchange is considered a transfer of collateral.

However, to keep the perfected status, the seller must follow appropriate measures such as filing a continuation statement or taking possession of the new item if applicable. Without further action by the seller to protect that interest, the perfection may not automatically extend to the new computer.