a man checking on the debtor name on his UCC filing
ComplianceFinanceSeptember 13, 2017

Getting the debtor name correct is critical

Even a minor error in the debtor name can render a financing statement seriously misleading, and leave the secured party with an unperfected security interest, as a recent case demonstrates in United States SEC v. ISC, Inc. (No. 15-cv-45-jdp. United States District Court, W.D. Wisconsin)

Double Bubble, Ltd. took a security interest in the assets of the debtor. Double Bubble filed a financing statement to perfect its security interest. The financing statement listed the debtor’s name as “ISC, Inc .” The name mistakenly included a space between the final “c” and the “.” The receiver in the case argued that the error left the financing statement unperfected.

The court noted that under 9-506(a), a financing statement that substantially complies is effective even it has minor errors or omissions, unless the errors or omissions make the financing statement seriously misleading. Under 9-506(b), a financing statement that fails sufficiently to provide the name of the debtor is seriously misleading.

Double Bubble claimed that the extra space was a minor error or omission, and therefore the financing statement was effective.

To resolve the dispute, the court then turned its review to the “searcher safe harbor” clause 9-506(c): If a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose a financing statement that fails sufficiently to provide the name of the debtor in accordance with Section 9-503(a), the name provided does not make the financing statement seriously misleading.

In this case, a search of the correct debtor name, using Wisconsin’s standard search logic *, did not uncover the financing statement at issue. As a result, the court held that the financing statement is seriously misleading, and the secured party is therefore unsecured.

This is nothing new; it is well-established law that has been in place since 2001. The lesson to be learned is that using the correct debtor name is critical.

The text of the decision can be viewed here:

*Although the search logic used by many state-level filing offices would disregard the minor error in spacing and disclose the financing statement in a search, this is not the case with Wisconsin’s search logic.

Amanda Rasizzi of Lien Solutions
Director of Marketing
Amanda Rasizzi is Director of Marketing for Wolters Kluwer Lien Solutions. She oversees all marketing activities for the company. Rasizzi and her team communicate the company’s array of lien management, risk management, and life-of-loan solutions to prospects and clients, support the selling efforts of the Lien Solutions organization, and position the organization as an industry market leader. 
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