## Facts

- Corey A. Lynch filed a Chapter 7 bankruptcy case in the Western District of Wisconsin.
- Farmers State Bank made a business loan to Lynch and took a broad security interest in Lynch’s business personal property under a General Business Security Agreement (GBSA).
- The Bank filed a UCC-1 financing statement with the Wisconsin Department of Financial Institutions.
- The financing statement’s collateral description stated only: “general business security agreement now owned or hereafter acquired.”
- The Bank did not attach the GBSA (or any other document) to the financing statement.
- The Chapter 7 trustee brought an adversary proceeding under 11 U.S.C. § 544(a) to avoid the Bank’s security interest, alleging the financing statement failed to sufficiently indicate the collateral and therefore did not perfect the interest.

## Issues

1. Whether a financing statement that describes collateral only by referencing a “general business security agreement,” without identifying any property categories and without attaching the agreement, “indicates the collateral covered” as required by Wis. Stat. § 409.502(1)(c).
2. If the financing statement is insufficient under Wisconsin Article 9, whether the trustee may avoid the Bank’s unperfected security interest under 11 U.S.C. § 544(a).

## Decision

- The court held the financing statement did not indicate the collateral as required by Wis. Stat. § 409.502(1)(c).
- The Bank’s filing referenced a document (the GBSA) rather than identifying any collateral (property subject to a security interest).
- Because the financing statement failed to identify collateral at all, the court did not proceed to substantial-compliance or minor-error analysis.
- The Bank’s security interest was unperfected, and the trustee, as a hypothetical lien creditor under § 544(a), could avoid it for the estate.

## Legal Principles

- Under Wis. Stat. § 409.502(1)(c), a financing statement is sufficient only if it “indicates the collateral covered” by the filing.
- A financing statement must identify collateral (property subject to the security interest); a bare reference to a security agreement, without any collateral description on the face of the filing or attachment of the agreement, does not satisfy the statutory requirement.
- Notice-filing concepts and liberal construction of collateral descriptions do not eliminate the statutory command that the financing statement indicate collateral; a complete failure to identify any collateral is fatal to perfection.
- Under 11 U.S.C. § 544(a), a Chapter 7 trustee has the rights of a hypothetical judicial lien creditor and may avoid an unperfected security interest under applicable state law.

## Conclusion

The bankruptcy court ruled that the Bank’s UCC-1, which merely referenced a “general business security agreement” without indicating any collateral, failed to perfect the Bank’s security interest under Wisconsin Article 9; as a result, the Chapter 7 trustee could avoid the unperfected interest under § 544(a).


In re Lynch, 313 B.R. 798 (Bankr. W.D. Wis. 2004)