On November 1, John purchased new furniture to be used at his law office. Neighborly Finance (NF) loaned John $10,000 to purchase the furniture and took a security interest in the furniture which was delivered that day. John signed a security agreement pertaining to the furniture, but NF didn't file a financing statement due to a clerical error. On November 25, John filed bankruptcy after a massive malpractice judgment was obtained against him. The next day, NF discovered it had never filed the financing statement with regard to the furniture and promptly went and filed the financing statement.
Can the bankruptcy trustee avoid NF's security interest using the Bankruptcy Code's strong-arm provision?
1. No. NF filed its financing statement and perfected its security interest giving NF priority over the trustee.
2. Yes. The trustee has the status of a lien creditor on the petition date and can avoid NF's security interest, which was not timely perfected.
3. Yes, even though the late-filed financing statement would still have been legally sufficient to perfect NF's security interest.
4. No. NF's security interest was a purchase-money security interest and was perfected upon attachment so NF's security interest has priority over the trustee's interest.