Enforceability of consensual lien against third parties

     In Commentary.Enforceability of consensual lien in personal property and fixtures and Commentary Enforceability of consensual lien on real property, both of which deal with the enforceability of consensual liens against a debtor, we do not mention recording, perfection, public notice, or the like.  The consensual secured creditor need do nothing beyond meeting the requirements discussed in those commentaries to foreclose the debtor's rights in the collateral if the debtor defaults. A debtor may not defeat the attempt of the holder of a consensual lien to foreclose on collateral with the plea that a deed of trust has not been recorded or a security interest has not been perfected. Public notice protects the interests of third parties, those who are external to the consensual secured transaction. Public notice is not a protection for the debtor.

     For this reason, your instructor may have chosen, as we do, to delay consideration of recording and perfection, and the consequences for the secured party of failure to take these steps, until after having fully considered the rights of the secured party against the debtor. But the consequences will be severe: the secured party's unrecorded lien may be subordinate to other parties claiming an interest in the same property or, in bankruptcy, the secured party's unrecorded lien may be eliminated entirely. Thus, it is critical for the secured party to take steps necessary to protect its interest in the debtor's property against third parties at the same time it takes the steps necessary to ensure that it can, upon default, foreclose the debtor's interest in the property.

     For the time being, you know enough about recording a mortgage from your first year Property course to understand the concept of the secured party giving public notice of its interest in property.