Also known as:purchase money security interest · purchase-money security interest · purchase-money security interests · PMSI · PMSIs
Written by attorneys · grounded in primary & secondary sources — see below
A security interest in goods or software that secures an obligation incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used. The interest receives special priority treatment when perfected in accordance with statutory timing requirements.
Sources & Authorities
How it applies
Common Examples
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Filing Within Grace Period Beats Lien Creditor
Philip Powell purchased manufacturing equipment from Pulse Media on credit and granted Pulse Media a security interest in the equipment. Pulse Media filed a financing statement fifteen days after Philip received delivery. A judgment creditor obtained a lien on the equipment twelve days after delivery but before the filing. Pulse Media's interest takes priority over the judgment lien because the filing occurred within the statutory window after delivery.
Automatic Perfection in Consumer Goods
Pedro Pacheco bought a refrigerator for personal use from Prosperity Investments on an installment contract that created a security interest in the appliance. Prosperity Investments did not file a financing statement. When Pedro later filed for bankruptcy, the trustee sought to avoid the interest. The interest remained perfected without filing because it qualified as a purchase-money security interest in consumer goods.
Select any source to read its text and confirm it supports the definition.
Uniform Acts
Casebooks
Hornbooks
Course Outlines
Study Supplements
Non-Inventory PMSI Priority Over Earlier Interest
Portia Price financed the purchase of specialized diagnostic equipment from Prism Analytics and granted Prism Analytics a security interest in the equipment. Prism Analytics perfected its interest by filing the day after Portia took possession. An earlier secured party held a blanket lien on all of Portia's assets. Prism Analytics's interest has priority in the equipment and its identifiable proceeds because the interest was perfected within twenty days after possession.
Inventory PMSI With Notification Requirement
Pierce Patterson obtained inventory on credit from Paragon Construction and granted Paragon Construction a security interest in the inventory. Paragon Construction perfected its interest when Pierce received possession and sent timely notification to an earlier inventory lender. Paragon Construction's interest has priority in the inventory and certain proceeds because it satisfied the notification and timing conditions for inventory purchase-money security interests.
Common questions
Frequently Asked
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What elements must be satisfied for a security interest to qualify as a purchase-money security interest?+
The obligation must be incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral, and the value must in fact be so used.
How does the twenty-day grace period affect priority for a purchase-money security interest?+
Filing a financing statement before or within twenty days after the debtor receives delivery allows the interest to take priority over buyers, lessees, or lien creditors whose rights arose in the gap period between attachment and filing.
Does a purchase-money security interest in consumer goods require a financing statement for perfection?+
No. A purchase-money security interest in consumer goods is perfected automatically upon attachment, subject to limited exceptions for titled goods.
What timing and notice requirements apply to a purchase-money security interest in inventory?+
The interest must be perfected when the debtor receives possession, and the secured party must send signed notification to any conflicting secured party describing the inventory before the debtor receives possession.
541 U.S. 465 (2004)Bankruptcy Law
…petitioners agreed to make 68 biweekly payments to cover this debt; Instant Auto — and subsequently respondent — retained a purchase money security interest that gave it the right to repossess the truck if petitioners defaulted under the contract. On October 25, 1999, petitioners, by then in default on their payments to respondent, filed a…
Real PropertyRights in real property · FixturesUBEFoundational