It is possible for a debtor to agree to give many different creditors, each unaware of the others, a security interest in the same goods. The general position is that the first creditor to perfect a security interest has priority over all other creditors. Upon default, the creditor with priority may repossess and resell the goods even if they are now held by an innocent purchaser. Such priority creditor takes as much of the proceeds from the sale of the collateral as is necessary to satisfy his or her claim against the debtor.
A perfected security interest results when the creditor gives proper notice of the existence of the security interest to all other potential creditors. Such notice may be given in a number of ways. For example, a creditor in possession of the collateral, as in a pledge, needs to take no additional steps for protection. Possession alone is notice to any possible subsequent buyer or creditor of the debtor that a security interest may exist. The creditor who has possession has a perfected security interest. If a creditor is able to repossess collateral upon default, the act of retaking possession also perfects the security interest even though the interest had not been perfected previously.
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