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UCC Expert’s Corner: Court Finds Security Interest Followed After Debtor Unloaded Loader

By Paul Hodnefield, Associate General Counsel for CSC

Under certain conditions, a buyer of goods in the ordinary course of business can take free of a security interest created by the seller, even if the secured party did not consent to the sale. The “buyer in ordinary course” rule applies primarily to sales of inventory collateral by a person engaged in selling goods of that kind. Attempts to claim buyer in ordinary course status for other types of collateral often fail, leaving the buyer to face claims for conversion or replevin by the secured party. That was the situation in the recent case In re: Taylor, 2012 Bankr. LEXIS 2825 (Bankr. E.D. Ky. June 19, 2012).