When is a termination statement typically filed?

• A. After the secured obligation is paid in full and the lien on the collateral is released.
• B. Upon default and sale of collateral.
• C. At the time the security agreement is signed.
• D. When the debtor files for bankruptcy.

Answer: (B)

A termination statement is filed to eliminate the secured party’s lien on the collateral and clear the public record that the security interest no longer exists. It’s typically filed when the secured obligation has been satisfied or when the collateral is released or disposed of, such as through default and sale. In a default situation, the collateral may be sold to satisfy the debt, and once that process clears the lien, a termination statement is filed to reflect that the security interest has ended and no encumbrance remains on the asset. Filing at signing would be premature because the debt and the security interest are still in effect, and bankruptcy involves a separate process that can suspend or modify liens rather than immediately terminating them.