Personal Property Security Act: Using Movable Assets as Collateral
Quick answer: Republic Act No. 11057 provides a modern system for using personal property—such as equipment, inventory, receivables, deposit accounts, and other movable assets—as collateral. A security agreement creates the interest between the parties; perfection makes the security interest effective against third parties, commonly through registration, possession, or control.
What the PPSA changes
| Concept | Practical meaning |
|---|---|
| Security agreement | Identifies the secured obligation and collateral |
| Attachment | The security interest becomes enforceable against the grantor |
| Perfection | Protects the interest against competing third parties |
| Registry notice | An electronic notice alerts searchers to a possible security interest |
| Priority | Determines who has the better right when claims compete |
| Enforcement | Provides remedies after default, subject to notice and commercial reasonableness |
Collateral the law can cover
The PPSA can cover present and future movable assets, tangible or intangible, and identifiable proceeds. Examples include machinery, vehicles subject to applicable registration rules, inventory, accounts receivable, intellectual-property rights, and certain financial assets.
Before accepting movable collateral
- Identify the grantor using the legally correct name and details.
- Describe the collateral so it is objectively identifiable.
- Confirm the grantor’s rights in the asset.
- Search the Personal Property Security Registry for earlier notices.
- Select the legally effective perfection method.
- Calendar expiration, amendment, continuation, and discharge events.
Registration is a notice system, not a government certification that the debt or collateral is valid. A financing statement with incorrect debtor information or inadequate collateral description can undermine priority.
Frequently asked questions
Is notarization enough to perfect a security interest?
No. Notarization and perfection serve different purposes. Use the method prescribed by the PPSA for the specific collateral.
Can one asset secure future loans?
Potentially yes, if the security agreement properly covers future obligations and the statutory requirements are met.
For installment purchases of personal property, the seller’s remedies may be governed by a different sales framework. See Recto Law remedies in installment sales of personal property and what happens when installment payments are missed.