What does PMSI stand for, and when can it have special priority?

What does PMSI stand for, and when can it have special priority?

• A. First-in-time secured interest.
• B. Primary Mortgage Security Interest.
• C. Private Money Security Interest.
• D. Purchase Money Security Interest.

Answer: (D)

PMSI stands for Purchase Money Security Interest. It can enjoy special priority over other security interests in the same collateral when it is properly perfected under UCC rules. In practice, this means the PMSI must be perfected in time. For many types of collateral, that means the security interest is perfected before the debtor takes possession of the goods. For inventory specifically, there’s a window: the PMSI must be perfected within 20 days after the debtor receives possession. There’s also often a notice requirement to other secured parties who have interests in the inventory. When those timing and notice requirements are met, the PMSI has priority over other liens on the same collateral, giving the lender first claim to the proceeds.

PMSI stands for Purchase Money Security Interest. It can enjoy special priority over other security interests in the same collateral when it is properly perfected under UCC rules. In practice, this means the PMSI must be perfected in time. For many types of collateral, that means the security interest is perfected before the debtor takes possession of the goods. For inventory specifically, there’s a window: the PMSI must be perfected within 20 days after the debtor receives possession. There’s also often a notice requirement to other secured parties who have interests in the inventory. When those timing and notice requirements are met, the PMSI has priority over other liens on the same collateral, giving the lender first claim to the proceeds.