A bankruptcy case in Illinois highlights the need for the amendments to Uniform Commercial Code Article 9 which will be effective in Indiana and many other states.
The Illinois bankruptcy case involved a borrower whose name was “Bennie A. Miller.” This was the name that Miller used in conducting his business transactions and was the name shown on his driver’s license, Social Security card, tax returns, and deed to his residence. The lender had filed a financing statement against Mr. Miller using this name. After Miller filed a Chapter 13 bankruptcy, he sought to avoid the lender’s lien. The bankruptcy court found in favor of the debtor on the basis that the financing statement filed under the name “Bennie A. Miller” was ineffective since the debtor’s legal name on his birth certificate was “Ben Miller.” A UCC search conducted under the debtor’s legal name did not reveal the lender’s UCC filing.
This case is significant in that it is the only known court decision to invalidate a UCC financing statement filing based on a name shown on the debtor’s driver’s license. There have been many other cases where the court found that a filing done under a nickname was not sufficient when a different name was used on the driver’s license, for example, “Mike D. Larsen” instead of “Michael D. Larsen.” However, this is the first case to determine that, if a nickname was used on a driver’s license and in a UCC filing, it was ineffective.
Fortunately, the amendments to Uniform Commercial Code Article 9 will clarify the questions surrounding a proper debtor name in a UCC filing. The model changes which have been adopted in Indiana and many other states will clarify that the “official” name for an individual debtor on a UCC financing statement will be the debtor’s name as shown on the driver’s license or state ID.
Although the bankruptcy court in this Illinois case reached an unusual result, it is recommended that lenders go ahead and start implementing processes now that require use of the debtor’s name as shown on his or her driver’s license or state ID when filing a UCC financing statement on an individual debtor.