Depending on the mode of perfection, there are several ways that perfection can lapse. For instance, a financing statement expires and will lapse if there is no continuation statement. Additionally, if collateral is perfected by possession and that possession ceases, then perfection will also lapse unless there is a temporary perfection.

Barnes v. Turner

606 S.E.2d 849 (Ga. 2004).


Do attorneys have the duty to ensure that the financing statement continues until payment is made?


Attorneys have a duty to either inform a client of the expiration date of a financing statement or to renew the financing statement themselves.


The lawyer did not inform his client of the expiration of the financing statement and did not renew. Thus, there was a breach of duty and the statute of limitations does not bar this claim. Reversed and remanded.


An attorney was retained to close on a purchase of a business. As part of the closing, a security interest was obtained in a 10-year promissory note. The financing statement was made and perfection was obtained. However, the lawyer did not inform his client of the expiration of financing statements being only five years; and the lawyer did not file a continuation statement to renew. Thus, five years came and went and the financing statement expired. The debtor went into bankruptcy, and the creditor had lost his priority because of the expiration of perfection.


The attorney had a duty to either inform or renew. He did neither. As such, he may be found liable for malpractice and the statute of limitations applies after the breach of the duty. The main argument of the court was that this is not an additional requirement put on attorneys but something that every attorney should know to provide competent representation. The client wishes to receive a secured interest and the attorney’s job is to ensure that the interest is secured until payment is made.

Additional Notes

Because it can be so easy for a perfection method to falter (either by the expiration of time or changes made to the debtor or collateral), it is common to perfect in several methods to ensure that there is no lapse if one method fails.

Below are some of the important changes that might affect the perfection status:

  1. Collateral or perfection method
  2. Loan
  3. Debtor
  4. Secured party

Changes in the collateral or perfection method

Acquiring Collateral

There are two questions to determine whether newly acquired collateral is perfected. First, is the newly acquired collateral attached to the original financing agreement through a newly acquired collateral clause? Second, if so, is the financing statement sufficiently broad to perfect the newly-acquired collateral? If the answer to either of these questions is no, then the secured party will need to follow the steps of attachment and perfection for the new collateral.

Proceeds of Original Collateral

As long as the original collateral was attached and perfected properly, proceeds will also automatically attach and perfect. However, perfection of proceeds lasts for only 21 days (9-315(c-d)) and any proceeds require additional perfection to avoid a lapse. There are three ways to extend this perfection:

  1. Same office rule. Three conditions are satisfied:
    • Financing statement covers the original collateral.
    • The proceeds could (hypothetically) be perfected by filing a financing statement within the same office as the original collateral.
    • The proceeds are not cash (and are not acquired with cash) proceeds. (9-315(d)(1)(A-C))
  2. If the proceeds are identifiable cash proceeds. (See 9-315(d)(2); 9-102(a)(9))
  3. The security interest is perfected by another perfection method within the first 20 days. So, having a financing statement that covers “all assets,” then all assets will already be perfected. (9315(d)(3))

Changes in Collateral Location or Characterization

There are several ways that collateral can change that may make it necessary to perfect again. Generally, a change in the use is not going to require a new financing statement as long as the initial financing statement was not seriously misleading. See 9-507(b). Changes may include, collateral that was once inventory may become equipment, the collateral can be transported from one state to another, or the collateral may change its nature (e.g., from real property to personal property).

Ultimately, there are three main types of results that occur with each change. Depending on what caused the change will determine whether there is a need to perfect again.

  1. The financing statement still describes the collateral and there was no change in perfection method. Regardless of the change, there is no need to have a new filing.
  2. The financing statement no longer describes the collateral. A new filing is needed only if non-cash proceeds were obtained with cash proceeds.
  3. There was a change to the perfection method. If this is the case, immediate action is necessary if the cause was a change in location or use (characterization) of the collateral.

Changes in the Loan

Every day, the amount in the loan will either decrease or increase. The question is, do these changes alter the perfection of the security interest attached to the loan? The answer, most of the time, is no. However, there are two considerations.

First, whether the loan has a future advances clause. This is a clause that allows the lender to provide additional money on the same loan, but in the future. If there is a future advances clause, then the original financing agreement and financing statement will be sufficient to perfect the future advance. However, if the clause is non-existent, then the new money needs to be follow a new set of perfection steps.

Second, whether the loan was based on a PMSI in a consumer good. Sometimes consumers will secure additional credit based refinancing the original loan. However, depending on the jurisdiction, if the refinancing destroys the PMSI status of the original loan, the new and original loan may not be perfected.

Changes in the Debtor

Because the financing statements are often indexed and tied to the debtor’s name and location, changes to the debtor often have a heavy influence on whether the security interest remains perfected.


A debtor name change affects perfection if the perfection has been made by filing a financing statement (because the purpose is to provide notice and notice remains the same for possession and control perfection methods). A name change would be seriously misleading on a financing statement. As such, after a name change, the financing statement is effective for four months. During that period, a new financing statement needs to be filed to ensure that there is no lapse in perfection.

See 9-507(b), (c); 9-506

Adding or Removing Debtors from the Financing Statement

If a new debtor authorizes an amendment, a secured party may file an amendment to add or remove a debtor. A security interest in the new debtor’s collateral becomes perfected from the time of the amendment. See 9-512(d-e); 9-509(a-c).


When a debtor changes location, 9-316(a) and (b) determines whether the secured party needs to do anything to maintain perfection. For instance, if the new address does not alter the governing law (see 9-502), then there is no need to refile. However, if the governing law changes, then the secured party has four months (unless the old financing statement will expire sooner than four months) to issue a new filing.

Transfer of Collateral

A transfer of collateral brings up two questions. First, is the collateral still attached. Second, is the collateral still perfected. Generally, a transfer remains attached unless the transaction is made “clear and free of the secured interest,” or if some other exception applies (9-315(a)(1)). Additionally, the collateral remains perfected as well, even though there is a new debtor. The main exception to this rule is if the new debtor lives in a different jurisdiction (the secured party will have a year to issue a new filing (9316(a)(3)).


When a debtor files for bankruptcy, the assets (collateral included) are transferred to a trustee of the estate. This keeps a secured party from creating engaging in new perfection steps or obtaining perfection in after-acquired property (after the bankruptcy filing). However, the secured party can still engage in maintaining perfection (filing continuation statements, make temporary perfection permanent).

Changes to the Secured Party

Changes to the secured party (name, location, owner) do not alter the perfection in a secured interest whatsoever.


The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.