Legal Paperwork Mechanics for Repossessing Bailment Tooling from Bankruptcy Estates
Secure immediate repossession of bailment tooling from bankruptcy estates by proving true bailment through UCC-1 filings, asset tags, and lifting the stay.
PMSI Super-Priority
Meaning
A special legal status under the Uniform Commercial Code grants a secured party first claim to specific collateral ahead of all other creditors who hold prior security interests. This preferential ranking is known as PMSI super-priority and applies when a lender or supplier finances the purchase of raw materials or manufacturing equipment. It ensures that those who enable the debtor to acquire new assets are paid first from the liquidation of those specific assets, protecting the financier from prior blanket liens on inventory.
Priority Rule
Securing first-tier status over existing blanket liens requires strict compliance with specific filing and notification rules. To establish PMSI super-priority for resin shipments, the supplier must file a financing statement before the moulder takes possession of the raw polymer. The notification must also notify existing lenders who hold conflicting security interests in the moulder’s inventory.
The double requirement ensures that subsequent financing does not secretly dilute existing collateral.
Sourcing Strategy
Resin distributors use this legal tool to continue shipping material to struggling moulders. By utilizing PMSI super-priority, the distributor protects its margins from being wiped out if the moulder collapses. This protection allows the moulder to keep production running without paying cash in advance.
It reduces the risk of sudden raw material shortages that could halt the customer’s assembly line.
Enforcement Hazard
Losing this priority status can occur if the supplier fails to trace the specific goods or their proceeds. When raw plastic is blended with regrind or converted into finished parts, identifying the original collateral becomes difficult. This failure reduces the supplier’s claim to ordinary unsecured status.