Is a security agreement invalid/weakened if not filed with UCC?

[phoenyx]

I own an S-Corporation which signed several promissory notes and security agreements for borrowing money from a close relative over the past few years.

My S-Corporation has since gone down the tubes. I'm closing the business and filing personal bankruptcy. Unless forced into corporate bankruptcy by creditors, my S-Corporation will be closing without filing bankruptcy.

Those documents state the loans he made to my company are secured loans, rather than unsecured loans. The loans he made were primarily for future inventory purposes, so they made sense to be secured.

We used some standardized legal forms, and the security agreement has this language in it:



He never filed a Uniform Commercial Code Financing Statement, however has our original signed documents.


MY QUESTION: Does his not filing the UCC Financing Statement invalidate or weaken the security agreement? If so, can he still file the UCC Financing Statements now -- even though they were signed between 2000 and 2005?

[HHM]

Invalidate, no

Weaken...only vis-a-vis other creditors who may make a claim against the assets of the corporation. Basically, if their are multiple claimants to corporate assets, the failure to file a UCC may make this person lose their place at the head of the collection line.

[phoenyx]

Invalidate, no

Weaken...only vis-a-vis other creditors who may make a claim against the assets of the corporation. Basically, if their are multiple claimants to corporate assets, the failure to file a UCC may make this person lose their place at the head of the collection line.

Thanks for the reply. Do you know if he can still file the UCC, or if there's a timelimit for doing so that's now past -- since the documents range between 2000 and 2005?

There aren't any other secured creditors, just the "super" creditors of the IRS and Michigan for past due employment and sales taxes.