Texas UCC Article 9, codified as Chapter 9 of the Texas Business and Commerce Code, governs loans secured by personal property. If you are a lender taking collateral other than real estate, or a borrower pledging it, Chapter 9 is the rulebook that tells you how to create the security interest, how to protect it against competing claims, and what happens when a borrower defaults. The structure moves in a predictable order: attachment, perfection, priority, and enforcement.
What Chapter 9 Covers
Chapter 9 reaches almost every category of personal property, plus fixtures (items attached to real estate that still carry a personal-property interest). On the tangible side, that means inventory held for sale, equipment used in business, farm products, and consumer goods bought for personal or household use. On the intangible side, it covers accounts receivable, payment rights, deposit accounts, investment property, and general intangibles such as intellectual property.
The category matters because the rules shift with it. Equipment and inventory follow one set of perfection and priority rules; deposit accounts and investment property follow another. Classifying the collateral correctly at the start saves a fight later.
Making the Security Interest Enforceable: Attachment
A security interest is not enforceable until it “attaches” to the collateral. Under Section 9.203, attachment requires three things to be true at the same time:
- The lender has given value (a loan, a line of credit, or other consideration).
- The borrower has rights in the collateral or the power to transfer rights in it.
- The borrower has authenticated a security agreement that describes the collateral.
The security agreement is a private contract. Its description of the collateral has to be specific enough to reasonably identify what is pledged. Something like “all Caterpillar excavators owned by debtor” works. A blanket phrase such as “all assets” does not satisfy the description requirement in a security agreement.1State of Texas. Texas Business and Commerce Code BUS and COM 9.203 That is one of the places Chapter 9 treats security agreements and financing statements differently, and it catches people out.
Once all three elements line up, the security interest is enforceable between the lender and the borrower. It is not yet enforceable against anyone else. For that, you need perfection.
Perfection: Protecting the Interest Against Third Parties
Perfection is the step that puts the rest of the world on notice. An unperfected security interest is valid between the two original parties but loses to almost any other claimant, including a later-filing creditor or a bankruptcy trustee. Chapter 9 recognizes three main methods, and the right one depends on the collateral.
Filing
Filing a UCC-1 financing statement is the default method and the one used for inventory, equipment, accounts receivable, general intangibles, and most other categories. The filing creates a public record a later lender can find through a search.
Possession
For goods, negotiable documents, instruments, tangible money, and tangible chattel paper, a lender can perfect by taking physical possession. The interest stays perfected only while the lender holds the collateral.2Legal Information Institute (LII). UCC 9-313 When Possession by or Delivery to Secured Party Perfects Security Interest Without Filing
Control
Some collateral can only be perfected by “control,” which generally means the lender can direct the disposition of the asset without needing the borrower’s further consent. Deposit accounts are the clearest example: filing does not work, so control is the only route. Investment property and electronic chattel paper allow both filing and control, but control wins in priority disputes.3Legal Information Institute. UCC 9-314 Perfection by Control
Filing a UCC-1 in Texas
A financing statement is legally sufficient with three pieces of information: the debtor’s name, the secured party’s name (or a representative’s name), and an indication of the collateral.4Justia Law. Texas Business and Commerce Code Section 9.502 Simple on paper. The debtor-name requirement is where filings go wrong.
Debtor Name
For a registered organization such as a corporation or LLC, the name on the financing statement must match exactly the name on the entity’s most recent public organizational record filed with its state of organization.5State of Texas. Texas Business and Commerce Code Section 9.503 A trade name, DBA, or shortened version is not enough and can make the filing ineffective. Lending to “ABC Holdings LLC” and filing under “ABC Holdings” can cost you priority.
For an individual debtor with an unexpired Texas driver’s license or state-issued ID, the financing statement must use the name exactly as it appears on that document. If the debtor does not hold a current Texas license or ID, use the individual’s name or their surname and first personal name.5State of Texas. Texas Business and Commerce Code Section 9.503
Collateral Description
Here the financing statement rules diverge from the security agreement rules. A financing statement can describe the collateral as “all assets” or “all personal property” and that is legally sufficient.6State of Texas. Texas Business and Commerce Code Section 9.504 Many lenders file with that broad language on purpose to cover future advances and after-acquired property. The financing statement’s role is notice; the detail lives in the unfiled security agreement.
Where to File
As of August 29, 2025, the Texas Secretary of State no longer accepts paper UCC filings. Initial financing statements and amendments must go through the SOS UCC Portal. The filing fee is $5.7Office of the Texas Secretary of State. Uniform Commercial Code – Fees The office assigns a unique filing number and records the date and time of submission, and that timestamp sets your priority against later claims. Keep the electronic confirmation.8Office of the Texas Secretary of State. About the Uniform Commercial Code
Filing in the right state matters as much as filing under the right name. Section 9.301 governs perfection by the law of the jurisdiction where the debtor is “located.”9State of Texas. Texas Business and Commerce Code Section 9.301 For a registered organization, that is the state of organization. A Delaware LLC that operates only in Texas is still filed in Delaware. For an individual, file in the state of principal residence.
Collateral tied to real property is the exception. Fixture filings and filings covering timber to be cut or minerals at the wellhead go into the county real property records where the land sits, not with the Secretary of State.4Justia Law. Texas Business and Commerce Code Section 9.502
Priority Between Competing Claims
When two creditors claim the same collateral, Section 9.322 sorts them out. The baseline rule is first in time: priority goes to whichever creditor filed or perfected first. A perfected interest always beats an unperfected one, and among unperfected interests the first to attach wins.10State of Texas. Texas Business and Commerce Code BUS and COM 9.322 That is why lenders rush to file the moment a loan closes.
Purchase-Money Security Interests
A purchase-money security interest (PMSI) is the main exception. A PMSI arises when a lender finances the specific purchase of the collateral, for example a bank funding the purchase of a piece of equipment, or a supplier selling inventory on credit. If the PMSI holder perfects within 20 days after the borrower takes possession of the goods, the PMSI jumps ahead of an earlier-filed blanket lien on the same type of collateral.11State of Texas. Texas Business and Commerce Code Section 9.324
PMSIs in inventory follow stricter rules. The lender must perfect before the borrower receives the goods and send written notice to every existing secured party of record covering that type of inventory, describing the inventory and stating that the sender has or expects to acquire a PMSI. The notice must be received within the five years before the borrower takes possession.11State of Texas. Texas Business and Commerce Code Section 9.324 Miss a step and the PMSI drops back into the ordinary priority order.
Control Beats Filing
For collateral that can be perfected by control, a lender perfected by control takes priority over one perfected only by filing, regardless of filing dates.3Legal Information Institute. UCC 9-314 Perfection by Control If more than one lender has control, the first to obtain it wins. A bank that holds a deposit account has a structural advantage here.
Keeping Perfection Alive: Lapse and Continuation
A financing statement is good for five years from the filing date. After that it lapses unless the secured party files a continuation statement, and lapse treats the filing as if it had never been made. The security interest becomes unperfected and loses its priority date, which can put a long-term lender behind a brand-new creditor overnight.
The continuation must be filed within the six-month window before the expiration date. Earlier is just as ineffective as later. Once a financing statement lapses, a continuation cannot revive it; the lender has to file a fresh financing statement, and priority resets to that new date. The amendment fee at the Texas Secretary of State is also $5.7Office of the Texas Secretary of State. Uniform Commercial Code – Fees
Enforcement After Default
Chapter 9 gives secured creditors broad enforcement powers and real limits on how to use them.
Repossession
After default, the secured party may take possession of the collateral. There are two paths: a judicial process through the courts, or self-help repossession without a court order so long as there is no breach of the peace.12State of Texas. Texas Business and Commerce Code Section 9.609 What qualifies as a breach of the peace is fact-specific, but physically confronting the borrower, breaking into a locked building, or proceeding over the borrower’s verbal objection generally crosses the line. For equipment, the lender can also disable the item in place without removing it. The lender may require the borrower to assemble the collateral and make it available at a location reasonably convenient to both parties, which helps when assets are spread across multiple sites.
Selling the Collateral
Once the lender has the collateral, it can sell, lease, license, or otherwise dispose of it. Every aspect of the disposition must be commercially reasonable: method, timing, terms. Sales may be public or private, in bulk or in pieces, but shortcuts expose the lender to liability.13State of Texas. Texas Business and Commerce Code Section 9.610
Before the sale, the lender must send a reasonable written notice to the borrower, any guarantor, and, for non-consumer goods, any other secured party with a filed financing statement indexed under the borrower’s name as of 10 days before the notice date.14Justia Law. Texas Business and Commerce Code Section 9.611 Notice is not required for perishable collateral or collateral sold on a recognized market such as publicly traded securities.
Surplus and Deficiency
Sale proceeds are applied in order: first to the lender’s reasonable expenses (including attorney’s fees if the agreement allows), then to the secured debt, then to any junior lienholders who submit a written demand before distribution is complete. Any money left over goes to the borrower. If the sale falls short, the borrower owes the deficiency.15State of Texas. Texas Business and Commerce Code Section 9.615
A lender who fails to follow the required enforcement procedures faces a penalty on the deficiency claim. In non-consumer transactions, the law presumes that a properly conducted sale would have covered the full debt, and the lender bears the burden of proving otherwise. In practice, a noncompliant lender often recovers little or no deficiency. Consumer transactions are handled under court-developed rules rather than a fixed statutory formula.