Continuation Statement

What Is a Continuation Statement?

A continuation statement is an amendment connected to a UCC-1 financing statement. Continuation statements expand the lender's lien on the borrower's collateral past the original financing statement's expiration date. At the point when a lender files a continuation statement, the continuation statement expands the UCC-1 financing statement by five years from the date of filing.

Continuation statements should be filed with the suitable authority, which fluctuates in light of the jurisdiction. Nonetheless, generally they must be filed with the secretary of state.

Figuring out Continuation Statement

Continuation statements must be filed in the six months prior to a UCC-1 financing statement's expiration. Statements filed outside of this window are rejected, whether they're filed too early or too late. In this manner, lenders must keep track of while their financing statements lapse, to try not to pass up on their opportunity to broaden them.

At the point when a lender files a continuations statement, they need to distinguish the initial UCC-1 financing statement that it corrects. If vital, a lender files extra continuation statements to broaden the financing statement for extra periods of five years.

Certain individuals call continuation statements UCC-3 continuations statements, since they allude to the Uniform Commercial Code (UCC), which is a set of regulations that oversee commercial transactions. This code attempts to streamline and explain the laws around commercial transactions and make them predictable across jurisdictions. The UCC states that a lender's lien on a borrower's collateral closes following a period of five years. Notwithstanding, on the off chance that the loan being referred to reaches out for longer than five years, the lender generally files a continuation statement for their own protection.

Why File a Continuation Statement?

Continuation statements safeguard lenders by assisting them with keeping a priority position if they need to collect a debt. Frequently, borrowers default on numerous debts without a moment's delay, due to financial hardship or basically in light of the fact that they've assumed too many loans. At the point when this occurs, various creditors frequently endeavor to collect on those debts immediately.

In the event that a lender has not filed a continuation statement for a specific financing statement, that statement quits being effective. When it is as of now not effective, different lenders who have filed financing statements gain priority status while seeking to collect on a debt.

A few transactions with financing statements don't need continuation statements to last for longer than five years. For instance, a financing statement filed regarding a public-finance transaction or a manufactured home some of the time lasts for a long time.

Illustration of Continuation Statement

Bank A stretches out a $100,000 loan to a rancher with his farm truck as collateral on Jan. 1, 2015. While the institution files a three-year financing statement, it neglects to file a continuation statement. Three years later, the rancher, who actually has not paid back his loan in that frame of mind, up the work vehicle as collateral with Bank B. Bank A files a continuation statement on Jan. 31, 2018, after the slipping by of its financing statement, and claiming the farm truck as collateral. Notwithstanding, the court concludes that Bank B gets priority over Bank An in claiming the farm truck as collateral.

Features

• They assist lenders with keeping a priority position to collect debt.
• Continuations statements are likewise alluded to as UCC-3 continuations statements since they allude to the Uniform Commercial Code (UCC), a set of regulations that oversee commercial transactions.
• Continuation statements are statements that expand the lender's lien on a borrower's collateral past the original expiration date.