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Mistaken termination of financing statement proves costly to lender

On October 27, 2014, the Delaware Supreme Court ruled that even inadvertent mistakes in UCC filings count, and the burden rests on the filing party to detect errors, and not on affected parties who come across them in a search. This ruling upsets a 2013 decision of a bankruptcy court and will ultimately determine the character of a $1.5 billion security interest in the General Motors (GM) bankruptcy.

Background

USA, Delaware, Banking, Insolvency & Restructuring, Litigation, Barnes & Thornburg LLP, Delaware Supreme Court
Whose burden is it to check for mistakes in UCC filings? Delaware Supreme Court flips bankruptcy court’s ruling in GM bankruptcy case

On Oct. 27, the Delaware Supreme Court ruled that even inadvertent mistakes in UCC filings count – the burden rests on the filing party to detect errors, and not on affected parties who come across them in a search. This ruling upsets the 2013 decision of the bankruptcy court and will ultimately determine the character of a $1.5 billion security interest in the General Motors (GM) bankruptcy.

Background

USA, Delaware, Insolvency & Restructuring, Litigation, Barnes & Thornburg LLP, General Motors, Delaware Supreme Court