| | | permits the obligor to determine how payments should be | | allocated. If the obligor fails to manifest its intention, | | obligations that are not secured will be paid first. (As | | used in this Article, the concept of "obligations that are | | not secured" means obligations for which the debtor has not | | created a security interest. This concept is different from | | and should not be confused with the concept of an "unsecured | | claim" as it appears in Bankruptcy Code Section 506(a).) | | The obligor may prefer this approach, because unsecured debt | | is likely to carry a higher interest rate than secured debt. | | A creditor who would prefer to be secured rather than | | unsecured also would prefer this approach. |
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| | | After the unsecured debt is paid, payments are to be applied | | first toward the obligations secured by purchase-money security | | interests. In the event that there is more than one such | | obligation, payments first received are to be applied to | | obligations first incurred. See subsection (e)(3) [Maine cite | | subsection (5), paragraph (c)]. Once these obligations are paid, | | there are no purchase-money security interests and no additional | | allocation rules are needed. |
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| | | Subsection (f) [Maine cite subsection (6)] buttresses the | | dual-status rule by making it clear that (in a transaction other | | than a consumer-goods transaction) cross-collateralization and | | renewals, refinancings, and restructurings do not cause a | | purchase-money security interest to lose its status as such. The | | statutory terms "renewed," "refinanced," and "restructured" are | | not defined. Whether the terms encompass a particular | | transaction depends upon whether, under the particular facts, the | | purchase-money character of the security interest fairly can be | | said to survive. Each term contemplates that an identifiable | | portion of the purchase-money obligation could be traced to the | | new obligation resulting from a renewal, refinancing, or | | restructuring. |
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| | | c. Burden of Proof. As is the case when the extent of a | | security interest is in issue, under subsection (g) [Maine | | cite subsection (7)] the secured party claiming a purchase- | | money security interest in a transaction other than a | | consumer-goods transaction has the burden of establishing | | whether the security interest retains its purchase-money | | status. This is so whether the determination is to be made | | following a renewal, refinancing, or restructuring or | | otherwise. |
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| | | 8. Consumer-Goods Transactions; Characterization Under Other | | Law. Under subsection (h) [Maine cite subsection (8)], the | | limitation of subsections (e), (f), and (g) [Maine cite | | subsections (5), (6) and (7)] to transactions other than a |
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