How does the filing of a UCC-1 financing statement establish priority among competing secured parties?

• A. The earliest effective filing generally has priority over later filings in the same collateral, with exceptions for purchase-money security interests and perfection by other permitted methods.
• B. Priority goes to the party who pays higher filing fees.
• C. The party who files last has priority.
• D. Priority is based on the size of the debt.

Answer: (A)

Perfection through a UCC-1 financing statement creates public notice of a secured party’s claim on the debtor’s collateral, and priority among competing secured parties generally follows who perfects first. The party with the earliest effective filing in the same collateral holds priority over later filings. There are important exceptions: a purchase-money security interest (PMSI) in the collateral can have priority over prior perfected liens in many cases if it is properly perfected within the required time frames, and perfection by other permitted methods (such as possession or control) can outrank a later-filed interest. Conversely, filing fees, who files last, or the size of the debt do not determine priority.