What is a requirement for a creditor to be in possession of collateral according to secured transactions?

In the context of secured transactions, a creditor must be in possession of collateral to achieve a specific legal status with respect to that collateral, which is also known as "perfection." Perfection is a legal process that establishes a creditor's rights against third parties, including other creditors.

By taking possession of the collateral, a secured party typically perfects its security interest automatically, without needing to file a financing statement. This is because possession provides clear, tangible evidence of the creditor's claim to the collateral, which serves as protection and priority against other claimants.

The requirement for perfection through possession highlights the importance of controlling the collateral to ensure the secured party’s interest is recognized and enforceable against others who might have competing claims. This aspect of secured transactions is crucial for law practitioners and creditors in ensuring they have the strongest claim possible to the collateral in question.