When is a security interest considered perfected?

A security interest is considered perfected when it has attached and additional steps have been taken to protect the interests of the secured party against third parties. Attachment occurs when there is a valid security agreement between the debtor and the secured party, the debtor has rights in the collateral, and value has been given by the secured party.

To achieve perfection, the secured party must take further action beyond just having an agreement. This typically involves filing a financing statement with the appropriate state authority, which makes the security interest enforceable against third parties. This public notice establishes priority in the collateral so that if the debtor defaults or enters bankruptcy, the secured party can enforce their rights.

This is why it is essential for a secured party to file a financing statement to ensure that their security interest is perfected and has priority over competing claims to the same collateral. Other options do not fully reflect the requirements for perfection under the UCC. For example, just having an agreement or possession alone does not guarantee perfection unless the necessary steps for filing or complying with perfection requirements are also met.