How to Discharge a Debt with UCC

Sarah Edwards | February 24, 2023

You may have taken out a loan to obtain business equipment or property if you’re a company owner. Business equipment allows you to create or produce the goods and services that attract your customers. Typical business loans involve funding for commercial real estate, business vehicles, office equipment, or inventory.

If you’re making timely payments to your lender, you likely won’t encounter any problems. However, if your sales dry up and revenue declines, you may not be able to keep up with your business loan payments.

Defaulting on a business loan can have severe implications for you and your company. Typically, lenders use a Uniform Commercial Code (UCC) lien to guarantee collateral before lending you money for your business. The items you purchase for your business can be collateral, but so can your personal property, like your home or vehicle.

If your company faces financial disaster, you’ll want to find a way to address the debt without sacrificing your assets. If possible, you’ll find a way to keep the property you need to keep your business afloat while modifying the terms of your loan.

What are UCC filings and UCC liens?

When you take out a business loan, chances are your lender will include a UCC filing. The UCC filing identifies any property you’ve pledged in return for the creditor’s funding. Once your creditor has the UCC filing, they can use it to file a UCC lien against the property.

A UCC lien gives additional security to the creditor. If the business owner defaults on the loan, the creditor can potentially seize the property identified in the lien. Creditors with the first lien on a property have the first right of refusal on it if the borrower defaults. All liens expire within five years, but creditors may renew them if the loan is long-term.

There are two types of UCC liens: a lien against specific collateral and a blanket UCC filing.

A lien against specific collateral concerns specific assets. For instance, an equipment lender may retain a lien on the property purchased but not on other business assets.

A blanket UCC filing lien is all-encompassing. The creditor will retain rights to all business property in the company. If the company owner pledges personal assets in the loan, the lender can requisition them if the owner defaults on the loan.

Businesses whose lenders place a blanket UCC filing on an organization will have difficulty obtaining other credit until they repay the loan.

How does a UCC filing impact an organization?

Most businesses will need some funding to expand. Company growth often requires additional office space, more employees, and expenses for marketing, research and development, and sales.

Funding can come from equity or debt. Equity grants investors a portion of ownership in the company, while debt requires the business to make regular payments to its creditors.

Taking on debt can be advantageous for businesses that use it appropriately. However, debt does have future implications for the company.

Like individuals, businesses build up a credit history. Their credit impacts their ability to obtain loans. An organization’s credit report will list any UCC filings from its lenders. The UCC filings will indicate the equipment affected and its collateral ownership.

UCC filings can impact the organization’s ability to obtain future financing. If there’s no equipment available as collateral to use for a business loan, creditors have less security in recouping their money if the loan defaults.

Loans secured with a UCC filing put the company’s collateral at risk. If the company cannot repay the loan, its lenders can file to recover the property and sell it to satisfy the debt.

How to eliminate a UCC lien

The best way to get rid of a UCC lien is to pay off the debt. If you pay off the debt, the lender has to release their hold on the assets.

Once you pay off a business debt, the lender must file a UCC-3 statement that removes the lien on the property. If the lender drags its heels on filing the notice, the company owner can send a written letter to the creditor demanding that they release the UCC lien.

If a business discovers an old lien on the property from a loan repaid long ago, they can approach their local secretary of state office. Most states will remove UCC liens if the owner provides an oath that the loan no longer exists.

Company owners who use an oath to remove a loan must verify that their statement is truthful. Lying about loan repayment to remove a UCC lien can land you in legal trouble, including fines, penalties, and possible jail time.

Can I declare bankruptcy to discharge a UCC lien?

Bankruptcy effectively eliminates unsecured debts, but not loans secured by a UCC lien. If business owners find they can’t meet their credit obligations, they can lose any property secured by a UCC lien.

If you, as the business owner, want to retain property held by a UCC lien, it’s best to attempt to resolve the debt with the lender. Find out whether they can lower your payments and extend the length of the debt or grant you a short-term forbearance.

If you don’t foresee an easy path to recovery, you might consider bankruptcy. Business owners can typically declare Chapter 7 or Chapter 11 bankruptcy. Sole proprietors are eligible for Chapter 13 bankruptcy.

A Chapter 7 bankruptcy is advisable if the company owner doesn’t believe the business is salvageable. Chapter 7 will absolve the company of most debts. The business will have to hand over all collateral held by secured loans, but it will eliminate the remaining unsecured business loans.

If the business owner believes the company has a chance for survival, a Chapter 11 bankruptcy is best. Under a Chapter 11 bankruptcy, the company continues to operate.

The business may retain property held as collateral if the owners and their creditors can come to mutually agreeable repayment terms. The UCC lien will remain until the owner can successfully discharge them through repayment.

Get help with your debts today

Dealing with debt is stressful and scary. But you don’t have to do it alone. SoloSuit can help you respond to debt collectors, in and out of court, and regain your financial footing.

When a debt collector initially contacts you, consider sending a Debt Validation Letter to force them to verify the debt before they continue collection efforts.

If you’ve been sued for a debt, respond to the debt collection lawsuit with a written Answer. File it with the court and send a copy to the opposing attorney. Use SoloSuit’s Answer form to respond to your case and increase your chances of winning by 7x.

Check out this video to learn more:

Finally, you can settle a debt for less than you owe by sending a an offer with SoloSettle. Many debt collectors are willing to settle for less because it at least guarantees that they’ll recoup some of the loss.

Beat debt collectors with SoloSuit.

What is SoloSuit?

SoloSuit makes it easy to fight debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt.

SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to answer a summons for debt collection in your state

Here's a list of guides for other states.

All 50 states.

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Guides on how to beat every debt collector

Being sued by a different debt collector? Were making guides on how to beat each one.

• Absolute Resolutions Investments LLC
• Accredited Collection Services
• Alliance One
• Amcol Clmbia
• American Recovery Service
• Asset Acceptance LLC
• Asset Recovery Solutions
• Associated Credit Services
• Autovest LLC
• Cach LLC
• Cavalry SPV I LLC
• Cerastes LLC
• Colinfobur
• Covington Credit
• Crown Asset Management
• CTC Debt Collector
• Cypress Financial Recoveries
• Delanor Kemper & Associates
• Eagle Loan of Ohio
• Educap
• Estate Information Services
• FIA Card Services
• Forster & Garbus
• Freshview Solutions
• Fulton Friedman & Gullace LLP
• Harvest Credit Management
• Howard Lee Schiff
• Hudson & Keyse LLC
• Integras Capital Recovery LLC
• Javitch Block
• Jefferson Capital Systems LLC
• LVNV Funding
• Mannbracken
• Mariner Finance
• Medicredit
• Michael J Adams PC
• Michael J Scott
• Midland Funding LLC
• Mullooly, Jeffrey, Rooney & Flynn
• Mountain Land Collections
• MRS Associates
• National Collegiate Trust
• Nationstar Foreclosure
• Northstar Capital Acquisition
• NCEP LLC
• NRC Collection Agency
• OneMain Financial
• Palisades Collection LLC
• Pallida LLC
• Paragon Revenue Group
• Pinnacle Collections Agency
• PMAB LLC
• Portfolio Recovery Associates
• Provest Law
• PYOD LLC
• Reunion Student Loan Finance Corporation
• Revenue Group
• Regents and Associates
• RSIEH
• Salander Enterprises LLC
• Second Round Sub LLC
• Security Credit Services
• Sherman Financial Group
• Suttell and Hammer
• T-Mobile
• Transworld Systems
• Tulsa Teachers Credit Union
• UCB Collection
• Velo Law Office
• Velocity Investments
• Waypoint Resource Group
• Weinberg and Associates
• Wolpoff & Abramson

Win against credit card companies

Is your credit card company suing you? Learn how you can beat each one.

• Bank of America
• Capital One
• Chase
• Credit One Bank
• PayPal Synchrony Card
• SYNCB/PPEXTR
• Synchrony Bank
• Target National Bank
• Wells Fargo

Going to Court for Credit Card Debt — Key Tips

How to Negotiate Credit Card Debts

How to Settle a Credit Card Debt Lawsuit — Ultimate Guide

Get answers to these FAQs

Need more info on statutes of limitations? Read our 50-state guide.

Why do debt collectors block their phone numbers?

How long do debt collectors take to respond to debt validation letters?

What are the biggest debt collector companies in the US?

Is Zombie Debt Still a Problem in 2019?

SoloSuit FAQ

If a car is repossessed, do I still owe the debt?

Is Portfolio Recovery Associates Legit?

Is There a Judgment Against Me Without my Knowledge?

Should I File Bankruptcy Before or After a Judgment?

What is a default judgment?— What do I do?

Summoned to Court for Medical Bills — What Do I Do?

What Happens If Someone Sues You and You Have No Money?

What Happens If You Never Answer Debt Collectors?

What Happens When a Debt Is Sold to a Collection Agency

What is a Stipulated Judgment?

What is the Deadline for a Defendants Answer to Avoid a Default Judgment?

Can a Judgement Creditor Take my Car?

Can I Settle a Debt After Being Served?

Can I Stop Wage Garnishment?

Can You Appeal a Default Judgement?

Do I Need a Debt Collection Defense Attorney?

Do I Need a Payday Loans Lawyer?

Do student loans go away after 7 years? — Student Loan Debt Guide

Am I Responsible for My Spouses Medical Debt?

Should I Marry Someone With Debt?

Can a Debt Collector Leave a Voicemail?

How Does Debt Assignment Work?

What Happens If a Defendant Does Not Pay a Judgment?

How Does Debt Assignment Work?

Can You Serve Someone with a Collections Lawsuit at Their Work?

What Is a Warrant in Debt?

How Many Times Can a Judgment be Renewed in Oklahoma?

Can an Eviction Be Reversed?

Does Debt Consolidation Have Risks?

What Happens If You Avoid Getting Served Court Papers?

Does Student Debt Die With You?

Can Debt Collectors Call You at Work in Texas?

How Much Do You Have to Be in Debt to File for Chapter 7?

What Is the Statute of Limitations on Debt in Washington?

How Long Does a Judgment Last?

Can Private Disability Payments Be Garnished?

Can Debt Collectors Call From Local Numbers?

Does the Fair Credit Reporting Act Work in Florida?

The Truth: Should You Never Pay a Debt Collection Agency?

Should You Communicate with a Debt Collector in Writing or by Telephone?

Do I Need a Debt Negotiator?

What Happens After a Motion for Default Is Filed?

Can a Process Server Leave a Summons Taped to My Door?

Learn More With These Additional Resources:

Need help managing your finances? Check out these resources.

How to Make a Debt Validation Letter - The Ultimate Guide

How to Make a Motion to Compel Arbitration Without an Attorney

How to Stop Wage Garnishment — Everything You Need to Know

How to File an FDCPA Complaint Against Your Debt Collector (Ultimate Guide)

Defending Yourself in Court Against a Debt Collector

Tips on you can to file an FDCPA lawsuit against a debt collection agency

Advice on how to answer a summons for debt collection.

Effective strategies for how to get back on track after a debt lawsuit

New Hampshire Statute of Limitations on Debt

Sample Cease and Desist Letter Against Debt Collectors

The Ultimate Guide to Responding to a Debt Collection Lawsuit in Utah

West Virginia Statute of Limitations on Debt

What debt collectors cannot do — FDCPA explained

Defending Yourself in Court Against Debt Collector

How to Liquidate Debt

Arkansas Statute of Limitations on Debt

Youre Drowning in Debt — Heres How to Swim

Help! Im Being Sued by My Debt Collector

How to Make a Motion to Vacate Judgment

How to Answer Summons for Debt Collection in Vermont

North Dakota Statute of Limitations on Debt

ClearPoint Debt Management Review

Indiana Statute of Limitations on Debt

Oregon Eviction Laws - What They Say

CuraDebt Debt Settlement Review

How to Write a Re-Aging Debt Letter

How to Appear in Court by Phone

How to Use the Doctrine of Unclean Hands

Debt Consolidation in Eugene, Oregon

Summoned to Court for Medical Bills? What to Do Next

How to Make a Debt Settlement Agreement

Received a 3-Day Eviction Notice? Heres What to Do

How to Answer a Lawsuit for Debt Collection

Tips for Leaving the Country With Unpaid Credit Card Debt

Kansas Statute of Limitations on Debt Collection

How to File in Small Claims Court in Iowa

How to File a Civil Answer in Kings County Supreme Court

Roseland Associates Debt Consolidation Review

How to Stop a Garnishment

Debt Eraser Review

Do Debt Collectors Ever Give Up?

Can They Garnish Your Wages for Credit Card Debt?

How Often Do Credit Card Companies Sue for Non-Payment?

How Long Does a Judgement Last?

​​How Long Before a Creditor Can Garnish Wages?

How to Beat a Bill Collector in Court