DEBTOR NAMES: STILL A PROBLEM UNDER UCC ARTICLE 9

By Marianne B. Culhane

Recently, the Eighth Circuit Bankruptcy Judges met in Nebraska to consider, among other problems, debtor names under UCC Article 9.  This was a particularly fitting location.  After all, it was the Nebraska Unicameral’s adoption of a non-uniform amendment to Article Nine that helped persuade the Uniform Law Commissioners and the American Law Institute to undertake yet another round of revisions to the Official Text of Article Nine in 2010—principally dealing with the debtor name provisions of that article.  In fact, the author of this short paper was nearly mugged by UCC gurus at a secured transactions conference in San Diego a few years ago, since she was known to teach Article 9 law in this renegade state that had dared to flout the uniformity of the Code and the commercial law wisdom of more populous states.

The filing system under Article 9 is based on the debtor’s name—financing statements are indexed under the debtor’s name, so both filers and searchers must know that name.  Because the name of the debtor is so important, the 2001 revisions to Article 9 currently in effect in all states address the problem.  Section 9-503(a) specifies what will suffice as the name for various types of debtors:  registered organizations, decedents’ estates, trusts, other organizations and individuals.  Section 9-506(a) provides that a financing statement containing minor errors may nevertheless be effective to perfect a security interest unless the errors make the financing statement “seriously misleading.” However, subsections 9-506(b) and (c) say that errors in the debtor’s name render the financing statement seriously misleading and thus ineffective to perfect a security interest unless “a search of the records of the filing office under the debtor’s correct name, using the filing office’s standard search logic…would disclose” the financing statement despite the name error.  Let’s call this the Search Logic Test.  It is unfortunate but true that the software used to search the UCC records in different states is not uniform.

Names of Registered Organization Debtors

For debtors which are registered organizations, it is relatively easy to determine the debtor’s name for filers and searchers.  Section 9-503(a)(1) says the name to use in that case is “the name of the debtor indicated on the public record of the debtor’s jurisdiction of organization which shows the debtor to have been organized.”  In other words, check the name of the entity in the Secretary of State’s Office (SOS) and use that exact name on the financing statement.  Trade names are not sufficient. Sec. 9-503(c).  Cases involving errors in registered organization names more often involve carelessness, spelling or other typographical errors, as opposed to “uncertainty about which version of a debtor’s name to provide.”[1] Omission of spaces or periods, inclusion or omission of “Inc.” or “Corporation” are common examples.  Depending on the search logic of the filing office, those errors may or may not invalidate the financing statement.  Some states’ search logic ignores “noise words” and spaces, while other states require the exact name, spacing and punctuation to avoid the “seriously misleading” category.

One recent example is In re EDM Corporation:  Hastings State Bank v. EDM Corporation, 51 Bankr. Ct. Dec. 62, 68 UCC Rep Serv. 2d 139 (Bankr. D. Neb 2009), affirmed 431 BR 459, 71 UCC Rep. Serv. 2d (8th Cir. BAP 2010).  In this case, the corporate debtor’s name in the Nebraska Secretary of State’s records was “EDM Corporation.”  Secured Party # 1, however, called the debtor “EDM Corporation, dba EDM Equipment” on its financing statement.  Later, Secured Party # 2’s search under “EDM Corporation” using the filing office’s standard search logic, failed to reveal the financing statement since the addition of the dba name meant there was not an exact match.  Judge Saladino was sympathetic to the filer’s argument that the financing statement in fact contained the correct name of the debtor, and that the inclusion of additional information, the dba name, should be irrelevant.  However, Judge Saladino correctly ruled that Article 9 is not so forgiving.  Instead, the statute mandates use of the Search Logic Test, and this financing statement had failed that test.  The Bankruptcy Appellate Panel affirmed Judge Saladino, in an opinion which includes a detailed discussion of SOS search logic. 431 BR 459, 71 UCC Rep. Serv. 2d ; see also Jim Ross Tires, Inc. , 379 B.R. 670 (Bankr. S.D. Tex 2007) (adding dba name after true corporate name makes debtor name seriously misleading, so financing statement is ineffective).

Recently, a Joint Review Committee of the Uniform Law Commissioners and the ALI proposed amendments to Article 9’s debtor name provisions, with a hoped for effective date of 2013.  The changes proposed for registered organization names are not likely to be controversial.  The main changes are to define a new term, “public organic record” at Amended sec. 9-102(68) and then to amend the definition of registered organization to provide that an entity is a registered organization if it is “formed or organized” under the law of a single state or of the United States by the filing of a public organic record with, issuance of a public organic record by or enactment of legislation by a state or the United States.   These changes are intended to clarify which public record of the corporation or other limited liability entity controls, as far as the entity’s name is concerned.  SOS offices often maintain records in addition to articles of incorporation, such as certificates of good standing and other documents which are not intended to be indisputable sources of debtor names.

Names of Individual Debtors

Individual debtor names are not as easily ascertained as those of registered organizations, and sections 9-503 and 9-506 provide almost no guidance.  The former says “the individual name” and the latter, in the Search Logic Test, requires a search using “the debtor’s correct name.”  Neither section tells how to choose a correct name.

Individuals in this country do not necessarily have only one legal name.  Married women in business and the professions often use their married name for some purposes, and their maiden names for work-related matters.  Further, it can be difficult to determine which part or parts of a name are the surname, yet a filing office is required to reject a financing statement that fails to provide the appropriate surname.[2] And myriad combinations of first name, middle initials, full middle name or names and various versions of nicknames, all add to the confusion. [3]

For example, in Clark v. Deere and Company (In re Kinderknecht), 308 B.R. 71 (10th Cir. BAP 2004), the debtor used the names Terrance Joseph Kinderknecht, Terry Kinderknecht and Terrance J. Kinderknecht.  See also Genoa Nat’l Bank v. Sw. Implement, Inc. (In re Borden), 353 B.R. 886 (Bankr. D.Neb 2006) (Mike Borden or Michael Ray Borden); In re Larsen, 2010 WL 909138 (Bankr. N.D Iowa 2010) (Mike D. Larsen or Michael D. Larsen);

Some of these difficulties could be minimized if filers would enter several versions of a debtor’s name on the same financing statement, as one can do, though in some states that increases the filing fee.  In the Kinderknecht case, for example, the secured party filed only against “Terry” even though the debtor’s birth certificate, driver’s license and social security card all used the name “Terrance.”[4] It is also possible, at least for large dollar deals, to require an individual debtor to incorporate so the lender can use a registered organization name on the filing.  In many individual debtor cases, however, there is room for doubt as to what in fact is the correct name to use.

These debtor names concerns led to non-uniform amendments in some states, including Nebraska, Tennessee and Virginia, amendments which made life easier for filers but significantly increased the burden on searchers.  For example, Nebraska attacked the problem by amending sec. 9-506(c)’s Search Logic Test to save financing statements found using a search under “the debtor’s correct last name.” [5] Harry Sigman, the ALI’s representative to the UCC Drafting Committee in the 1990’s, remarked that this “created the potential that all a filer had to get right was the debtor’s surname.  Imagine the prospect of searching for filings against a prospective debtor named Smith!”[6] Tennessee’s approach was to amend sec. 9-503 to so that a name would be sufficient if it was used on the debtor’s driver’s license, social security card or military ID card.[7] That meant searchers had to check out all these documents since a name on any one of the three would validate a financing statement.  Virginia said the name on a driver’s license or state-issued ID card would suffice.[8]

The prospect of more non-uniform amendments got those who rule the UCC to address the problem via proposed changes to the Official Text of UCC Article 9.  The drafting committee no doubt hoped to find something as certain as the registered organization name, but that seems impossible in the individual name arena. Instead, the drafters compromised and sent forward two versions of sec. 9-503(a)(4), with the catchy names of Alternative A and Alternative B.

Alternative A

(4) …if the debtor is an individual to whom this State has issued a [driver’s license] that has not expired, only if the financing statement provides the name of the individual which is indicated on the [driver’s license]; and

(5) if the debtor is an individual to whom paragraph (4) does not apply, only if the financing statement provides the individual name of the debtor or the surname and the first personal name of the debtor, … (emphasis added)

Alternative B

(4) if the debtor is an individual, only if the financing statement:

(A) provides the individual name of the debtor;

(B) provides the surname and first personal name of the debtor; or

(C) …provides the name of the debtor which is indicated on a [driver’s license] that this State has issued to the individual and which has not expired; …

A Legislative Note to proposed sec. 9-503 provides that under both alternatives, if a single state agency issues driver’s licenses and non-driver ID cards as an alternative to a driver’s license, “such that at any given time, an individual may hold either…but not both, the State should replace each use of the term “driver’s license” with a phrase meaning “driver’s license or identification card” but containing the analogous term used in the enacting State.”

Alternative A, as the Official Comments note, divides individual debtors into two groups: Those holding an unexpired driver’s license issued by the State where the financing statement is filed, and all other debtors.  For the first group, the financing statement will suffice only if it contains the name of the debtor as shown on the driver’s license. Even if the name on the driver’s license is erroneous, that name must be used on the financing statement, not the debtor’s correct name.[9] No other source of a debtor’s name on a financing statement is allowed under Alternative A for debtors who hold an unexpired driver’s license.

Alternative A might seem to provide certainty, but the Official Comments caution that states differ in how they format names on driver’s licenses.  Some put the surname first, others put it last.  “Regardless of the order on the driver’s license, the debtor’s surname must be provided in the part of the financing statement designated for the surname.[10] Some states put numbers (birth date or driver’s license number) on the same line as the name.  Harry Sigman notes that some Nebraska driver’s licenses include MD or DDS on the same line and immediately following the driver’s name for health professionals. [11] Does that become part of the name for purposes of the financing statement under Alternative A?

Alternative A’s second group of debtors includes only persons who do not hold an unexpired driver’s license issued by the state in which the filing will be made.  For this group, Amended subsection (5) of 9-503 says the financing statement must provide either “the individual name of the debtor or the surname and first personal name….”

Alternative B, on the other hand, provides two safe harbors in addition to current law, allowing use of the debtor’s surname and first personal name or the name on the debtor’s unexpired driver’s license.  Unlike Alternative A, Alternative B would protect a filer who used the debtor’s correct surname and first personal name even if that differed from the name on the debtor’s driver’s license.

Tying financing statement sufficiency to the names on driver’s licenses, which Alternative A requires, and Alternative B allows as an option, can also be problematic in that DMV software may permit characters and punctuation that the SOS software cannot handle.  For example, many Spanish names include a tilde over the letter “n” and the DMV may include that character on the driver’s license.

Requiring use of the driver’s license name means secured parties must keep track of changes in each state’s DMV system and formatting practice, look for prior licenses of the debtor which might spell the name differently, and watch out for subsequent licenses.  Also, since immigration, identity theft and national security problems are leading DMV’s to change their practices and to restrict access to their records, learning of these changes may be difficult.  As Professor Ken Kettering notes,

The name of a registered organization is, by definition, a matter of public record (in many states instantly available online), while the name on a driver’s license is not.  Good luck making sure you’re looking at the most current driver’s license; good luck not confusing a driver’s license from another state with a …license from the filing state; good luck tracking changes in the debtor’s (nonpublic) driver’s license.[12]

Adoptions to Date

As of early June, 2011, seven states had adopted the 2010 Amendments to Article 9.  Three of those states are in the Eighth Circuit:  Minnesota, Nebraska and North Dakota, and all three chose Alternative A for Individual Debtor Names.  The other adopting states are Indiana, Nevada, Texas and Washington.  Indiana went with Alternative A, while Washington chose Alternative B.  Anybody out there know which way the wind blows in Nevada and/or Texas?  I’d love to hear from you.


[1] Harry C. Sigman, Improvements (?) to the UCC Article 9 Filing System, 46 Gonz. L. Rev.— (forthcoming Mar. 2011).

[2] Section 9-516(b)(3)(C) and Official Comment 2 to 9-503.

[3] Margit Livingston, A Rose by Any Other Name Would Smell as Sweet (or Would It?) Filing and Searching in Article 9’s Public Records, 2007  B.Y.U. L. Rev, 111 (2007).

[4] Sigman, supra note 1 at 10.

[5] L.B. 851, 2008 Leg., 100th Sess. (Neb. 2008).  This was delayed and finally repealed before it took effect.  L.B. 751, 2010 Leg. , 10st Sess. (Neb. 2010).

[6] Sigman, supra note 1 at 11-12, note 31.

[7] Tenn. Code. Ann. sec. 47-9-503(a)(4)(West 2010).

[8] Va. Code Ann. sec. 8.9A-503(a)(West 2010).

[9] Comment 4 to Proposed sec. 9-503.

[10] Id.

[11] Sigman, supra note 1 at 17, note 48.

[12] Ken Kettering, “Individual Names and Magical Thinking, letter submitted to UCCLAW-L ([email protected]) on 4/19/2011.


Marianne CulhaneMarianne Culhane is Dean and Professor at Creighton University School of Law School She received her Bachelor of Arts degree, cum laude, from Carleton College, and her Juris Doctor degree, magna cum laude, from the University of Iowa, where she was a member of the Order of the Coif and the recipient of the Iowa Bar Award of Merit. She joined the Creighton faculty after serving as law clerk to Judge Donald P. Lay of the U.S. Court of Appeals for the Eighth Circuit and practicing law in Omaha. She served on the Board of Trustees of the Iowa Law School Foundation and the Board of Directors of the Omaha Legal Aid Society. She has taught Banking Law, Debtor-Creditor Relations, Secured Transactions, and Selected Commercial Topics. Dean Culhane and Professor Michaela White were the principal investigators for two nationwide empirical research projects on means-testing and reaffirmation in bankruptcy, with grants from the National Conference of Bankruptcy Judges, the American Bankruptcy Institute (ABI) and the Nebraska State Bar Association. In 2003, she was the ABI’s Resident Scholar and in 2008, was the Southeastern Bankruptcy Institute Visiting Scholar at Georgia State College of Law. She became Dean of the Law School on January 1, 2010 and previously served as Interim Dean from July 2007 to June 2008.

No Author Biography has been linked to this Article.

Related Articles

Copy of Hildebrand-2016
March 19, 2023
Below-median Chapter 13 debtor bears the burden of justifying a plan longer than three years as confirmation of a five-year plan would be denied as providing insufficient justification to exceed three years. (Robinson) In re Ingram, 2023 WL 2529730 (Bankr. N.D. Ala. March 15, 2023) Case Summary Danny Ingram filed four bankruptcy cases over 20 years. He was single with...
Members
Copy of Hildebrand-2016
December 18, 2022
Where a debtor fails to disclose to the Court or the trustee a forbearance on his mortgage that he was to pay directly, the Court would grant the trustee’s motion to modify to recapture as much as possible of the surplus funds the forbearance generated. (Kenney) In re Ilyev, 2022 WL 2965029 (Bankr. E.D. Va. July 26, 2022) Case Summary...
Members
Copy of Hildebrand-2016
September 18, 2022
Insurance proceeds generated due to a totaled car treated under the “hanging paragraph” of 1325(a) covers the entire claim; interest, however, is not recalculated even though it was a higher rate than the interest paid under the plan. (Hanan) In re Pagan, 638 B.R. 887 (Bankr. E.D. Wis. Jan. 24, 2022) Case Summary Bankruptcy judges have been overheard saying that...
Members
May 23, 2021
By Lawrence R. Ahern, III, Brown & Ahern (Nashville, TN) Introduction The Bankruptcy Court for the District of Colorado ruled recently, in a case styled In re Ikalowych,1 that while eligibility for subchapter V of Chapter 112 requires that 50% of a debtor's debt must arise from commercial or business activities, the debtor was not required to be directly involved...
Members
moran_cathy
October 30, 2022
Spending every dollar they make, and then some, is often how our Chapter 13 clients got into financial trouble. Yet Chapter 13, as practiced, validates the practice of continuing to spend 100% of each month’s income during the life of the plan. In doing so, we, as a society, squander the chance to use Chapter 13 to teach new budgeting...
Members
September 20, 2020
By Henry E. Hildebrand, III, Chapter 13 Standing Trustee for the Middle District of Tennessee (Nashville) A Non-Governmental Private Student Loan Obligation is not always excepted from discharge by § 523(a)(8). (Holmes) McDaniel v. Navient Solutions, LLC, 2020 WL 5104560 (August 31, 2020) Case Summary Bryon and Laura McDaniel filed a Chapter 13 petition in 2009. They acknowledged that, among...
Members
Molly Pro picture
June 26, 2022
Consider if you will that your client has just filed a Chapter 13 Bankruptcy. They have intelligently chosen to surrender a luxury item - a boat or 4-wheeler or even that extra vehicle they don’t need. Because the creditor would like to preserve the value of the collateral by obtaining possession quickly, they file a Motion for Relief shortly after...
Members
Copy of Hildebrand-2016
December 4, 2022
Chapter 13 plan which provided a specific amount to be cured on a reverse mortgage under § 1322(b)(5) would be controlled by the specific term of the plan provision and not by the larger proof of claim filed by the creditor. (Baer) In re Edelstein, 2022 WL 16730027 (Bankr. N.D. Ill. November 7, 2022) Case Summary The Edelsteins filed Chapter...
Members
kevinanderson
February 18, 2024
With facts and graphs, Judge Anderson discusses lowest filing levels since ’85, the impact of filings on judgeships, weighted caseloads, judicial vacancies, and recall judges.
Members
Angela scolforo
September 11, 2022
The Mississippi Bankruptcy Court in The Huntington National Bank vs. Ashley Mosby, case #21-11614, adversary case #21-1028, on September 1, 2022, denied the bank’s request to declare a debt non-dischargeable because the bank did not rely upon the debtor’s false statement. In this case the Debtor purchased a 2020 Dodge Challenger, financed by the bank, without disclosing she intended to...
Members

Looking to Become a Member?

ConsiderChapter13.org offers a forum to advance continuing education of consumer bankruptcy via access to insightful articles, informative webinars, and the latest industry news. Join now to benefit from expert resources and stay informed.

Webinars

These informative sessions are led by industry experts and cover a range of consumer bankruptcy topics.

Member Articles

Written by industry experts, these articles provide in-depth analysis and practical guidance on consumer bankruptcy topics.

Industry News

The Academy is the go-to source for the latest news and analysis in the Chapter 13 bankruptcy industry.

To get started, please let us know which of these best fits your current position: