What is the general rule for priority of security interests?

The general rule for the priority of security interests is guided by the principle of "first in time, first in right." This means that the first security interest filed or perfected generally takes precedence over subsequent interests. This rule is crucial because it provides clarity and predictability in the enforcement of security interests, especially when there are multiple claims on the same collateral.

When a creditor perfects their security interest by filing a financing statement or taking possession of the collateral, they effectively establish their priority against other creditors. If another creditor later attempts to assert a security interest in the same collateral, that creditor’s claim will be subordinate to the first creditor whose interest was perfected.

This principle is key in determining the order in which creditors can collect from the collateral upon default. It ensures that those who establish their interests first have a stronger claim compared to those who came later. Understanding this "first in time, first in right" rule is essential in navigating secured transactions, as it affects how rights are enforced and remedies are sought in cases of default.