Who generally has priority in claims over collateral?

The priority in claims over collateral in secured transactions typically adheres to the principle that the first party to file a financing statement or perfect their security interest has the highest priority. This is rooted in the Uniform Commercial Code (UCC) provisions regarding secured transactions, which establish that perfection—either through filing, possession, or control—determines the relative priority of competing claims on the same collateral.

The rationale for giving priority to the first party to file or perfect their interest is to promote certainty and predictability in the secured transactions process. This means that parties who take prompt action to establish their interests in collateral can rely on their positions as priority creditors.

In contrast, the other options do not align with established principles of secured transactions. The last to file a claim does not automatically gain priority, as the UCC prioritizes the timing of filings and perfection. Additionally, the size of a loan or the amount of credit extended does not confer superior rights to the collateral. Similarly, while physical possession of collateral can give the secured party a strong position in some cases (especially in terms of priority over unsecured creditors), it does not guarantee overall priority in claims compared to properly filed or perfected interests.

Thus, the law broadly recognizes that the first to file or perfect