Security Interests
Friday, March 13th, 2026
Hi. My name is John Hinders. I’m an attorney in the corporate group at Brown and Fortunato, and I’m going to talk today a little bit about security interests, what they are, and when you might need one.
Generally speaking, the purpose of a security interest is just to grant an interest in property of a debtor to ensure that the creditor gets paid if the debtor finds themselves in a tight spot.
Most people will encounter security interests as individuals, either in the mortgage required by the bank or a security interest in a car bought on credit. But anyone can and should take advantage of security interests if they’re loaning money, whether that’s to a business, or to a friend or a family member.
Security interests really come in two parts. There’s the written agreement. It does need to be in writing, a handshake isn’t good enough. As between the debtor and the creditor, that could take the form of a security agreement, for personal property, or deed of trust or a mortgage for real property.
The other half of the security interest is the perfection. And this is what puts the world on notice of your interest in the property and what determines who gets the value of that property should it be sold in the future to pay off debtors’ obligations.
So this is incredibly important, both as against other creditors and if the debtor is to file bankruptcy, that’s what ensures you get paid based on your security interest.
What kind of property determines both the documentation and the perfection for personal property? Typically, the relevant document will just be a security agreement, and it’ll be perfected by filing a UCC1 financing statement with a Secretary of State of whatever state the debtor either lives in, or if it’s an entity, where they were formed.
If the personal property is titled, like a car, again you’ll have a security agreement, but it’ll be perfected by noting the security interest on the title itself.
Security interests in personal property tend to be very uniform across all states because basically every state has adopted some version of the Uniform Commercial Code. By contrast, there can be a lot more variety with liens in real property because they vary from state to state.
The security interest could be created by a deed of trust or mortgage. In either case, they’re going to be perfected by recording that instrument with the county clerk wherever the real property is located.
If you have any questions, or we can help with the creation of any loan documents, including security agreements, we encourage you to reach out to us at Brown & Fortunato.