Texas Secured creditors often have an advantage to unsecured creditors when in comes to collection cases as they have interests in the assets of the debtor based on their priority. Priority is established according to state law, but generally the concept is that the first creditor to file and perfect their interest in the collateral will supercede over subsequent filers.

A creditor, in order to have a valid security interest, the debtor needs to have an indebtedness, the debtor needs to have an interest in the collateral, and the security interest needs to be perfected. How to perfect a security interest generally varies by the type of collateral. For example, perfecting an interest in a car requires a notation and holding of the certificate of title, whereas perfecting an interest in personal property of a debtor is created generally by a filing with the Secretary of State's office where the debtor is located. For the purpose of a corporation, under the relatively recent Article 9 of the Uniform Commercial Code, the debtor is located in the state of formation.

Unsecured creditors, once the customer becomes distressed, may wish to create security interests and/or plan for a bankruptcy or insolvency of a debtor to become secured.

To learn more about creation of security interests in Texas, please contact an attorney with Lippincott Phelan Veidt.