How is automatic attachment to proceeds of collateral achieved?

Automatic attachment to proceeds of collateral is achieved when the original collateral was perfected. Under the UCC (Uniform Commercial Code), when a security interest is created in collateral and that collateral is later sold, exchanged, or otherwise disposed of, the security interest automatically extends to the proceeds of that collateral. This occurs without the need for any additional actions, provided that the original collateral was properly perfected at the time the interest was registered.

To elaborate, when a secured party has a perfected security interest in specific collateral, the UCC automatically grants them a perfected security interest in the proceeds. This allows the secured party to have rights to any cash or other property generated from the collateral, ensuring that they maintain a continuous claim over the value generated from the original collateral even after it is converted into other forms.

The other options, such as filing a new UCC-1 financing statement, involve proactive measures that would not apply to the automatic nature of this provision. Continuous automatic perfection may apply to certain types of collateral but is not the mechanism for attaching to proceeds. Transferring deeds of trust does not relate directly to the automatic attachment of proceeds but deals more with real property interests rather than personal property security interests where UCC governs.