How Credit Unions Can Handle Collateral Disputes and Competing Lien Claims

When multiple creditors claim an interest in the same collateral, a credit union should first identify each claim, confirm how its own security interest was created and perfected, and determine the applicable priority rules. From there, the credit union can evaluate whether the dispute should be resolved through negotiation, collection proceedings, bankruptcy, foreclosure, or litigation.

The important point is not to assume that the earliest loan or lien automatically wins.

At Sorenson Van Leuven, PLLC, we work with credit unions throughout Florida and Georgia on collateral disputes, lien priority, collections, bankruptcy, foreclosure, and related litigation. We help teams understand where the credit union stands and what recovery options remain available.

Start With the Credit Union’s Security Interest

Before addressing another creditor’s claim, confirm the credit union’s own position.

That review may include the security agreement, loan documents, UCC financing statements, vehicle title records, mortgages or security deeds, assignments, and other documents tied to the collateral.

The type of property matters. A security interest in business equipment may be perfected differently from an interest in a titled vehicle or real estate. Attorney Jim Sorenson explains:

“When two creditors are claiming the same collateral, the first question is not who is being more aggressive. It is what the documents and public records actually establish about each party’s rights.” - Attorney Jim Sorenson

How Is Lien Priority Determined?

For many types of personal property, Florida and Georgia follow Article 9 of the Uniform Commercial Code.

As a general rule, a perfected security interest has priority over an unperfected interest. When two interests are perfected, priority often depends on the timing of filing or perfection.

But there are important exceptions. Purchase-money security interests may receive special priority when statutory requirements are satisfied. Different rules can also apply to deposit accounts, vehicles, fixtures, proceeds, and other forms of collateral.

Identify Problems With Perfection Early

A credit union may have a valid security agreement but still encounter problems with perfection or priority. Potential issues include:

• An incorrect debtor name on a financing statement
• A lapsed or missing UCC filing
• Problems with a vehicle lien or certificate of title
• An inaccurate collateral description
• A previously perfected competing interest
• A purchase-money claim with potential priority
• Problems with a mortgage, security deed, or assignment

Discovering one of these issues does not necessarily determine the outcome. It does mean the credit union should understand its position before repossession, foreclosure, or litigation proceeds.

Decide How to Address the Competing Claim

Not every lien dispute needs to become a lawsuit. Creditors may sometimes resolve competing interests through payoff agreements, lien releases, negotiated distributions, subordination agreements, or another arrangement.

Other disputes require court involvement, particularly when the parties disagree about ownership, validity, perfection, or priority.

Bankruptcy can add another layer. If the borrower files, the automatic stay may restrict collection activity, while lien validity and priority can become important to how secured claims and collateral are treated in the case.

Account for Florida and Georgia Law

Credit unions operating in both states should account for differences in state law and recovery procedures.

Both Florida and Georgia have adopted Article 9 rules governing many secured transactions, including general priority rules for conflicting security interests. Florida law, for example, generally gives perfected interests priority over conflicting unperfected interests and uses filing or perfection timing to rank many competing perfected interests.

Real property, titled vehicles, statutory liens, and other assets may follow different rules. Those distinctions should be identified before deciding how to enforce a claim.

Resolve Lien Priority Before It Becomes a Recovery Problem

A competing lien can affect whether repossession makes sense, how foreclosure proceeds, what a credit union may recover from a sale, and whether litigation is worth pursuing.

At Sorenson Van Leuven, PLLC, we help credit unions in Florida and Georgia review collateral documents, evaluate lien priority, and determine the practical options available when another creditor claims the same property.

If your credit union has identified a competing lien or questions about its position in collateral, schedule a brief introductory call with our team to review the issue before the next recovery step is taken.