A security agreement that has been filed with the appropriate court to provide the surety a priority interest over others who may also have security interests in the property.

• A. Security interest
• B. Perfected security interest
• C. Pledge
• D. Constructive notice

Answer: (B)

Perfection of a security interest is what gives a secured creditor priority over other potential claimants in the same collateral. A security interest is created when the debtor signs a security agreement and value is provided, but to prevail in conflicts with other creditors, that interest must be perfected. Filing a financing statement with the appropriate filing office (often the court or regulatory agency) publicly records the secured party’s interest, establishing notice to the world. This filing is the standard method to perfect under the UCC and ensures the perfected secured party has priority over other perfected or later-created interests in the collateral.

A pledge, by contrast, involves giving possession of the collateral to the creditor and is a different way to secure an obligation, not necessarily the mechanism for establishing priority through perfection. Constructive notice is a legal concept related to notice to third parties, but it is the act of perfecting (filing) that creates enforceable priority.