Fraudulent UCC Financing Statements Hurt Thousands of Businesses and Individuals Each Year. Here’s How Victims Can Fight Back.
By Robert M. Horwitz and Jonathan M. Sollish
Uniform Commercial Code (UCC) financing statements (UCC-1s) are a critical part of the commercial ecosystem. Filed with secretaries of state and similar state-level authorities, these public records serve to secure creditors’ rights in collateralized goods, inventory, or other property and put others on notice of the encumbrance. But it doesn’t take much to prepare and file a financing statement. In recent years, these documents, which are supposed to protect creditors, are being wielded as weapons by bad actors against companies out of revenge, retaliation, spite, or, most commonly, extreme political beliefs.
An Endemic Problem
Bogus UCC filings have become an endemic problem nationwide, creating costly and disruptive headaches for those victimized by these fraudulent encumbrances. It can hobble a business’s ability to obtain loans and collateralized financing and, when filed against an individual, can devastate their credit rating and cause other serious problems.
Many of these fraudulent UCC-1s are filed by members of the “sovereign citizen” movement, whose adherents believe the government is illegitimate. Declared a domestic terrorist organization by the FBI, members see filing UCC-1s as a way to strike back against perceived government interference in their lives.
For years, secretaries of state have worked together to find preventative solutions, more accessible remedies for victims, and criminal sanctions for perpetrators. Most recently, in June 2025, Texas enacted a new law that establishes an administrative procedure for terminating fraudulent or baseless UCC-1 financing statements in which a UCC-1 will be terminated 30 days after a debtor files an affidavit with the state’s filling office asserting its fraudulence or illegitimacy (though creditors have an opportunity to challenge the affidavit and have their UCC-1 reinstated).
How Michigan Addresses Bogus UCC Financing Statements
Michigan’s framework for countering bogus UCC filings is found in Mich. Comp. Laws § 440.9501 and Mich. Comp. Laws § 440.9501a, which Texas’s law mirrors in some respects. It provides that a debtor named in a financing statement may file an affidavit with the Michigan Secretary of State, for no cost, stating that the document is fraudulent. Upon receipt, the Secretary of State will terminate the financing statement. The filer may then bring an action in court to challenge the affidavit and reinstate the financing statement. Still, if that challenge is unsuccessful and a court finds the document to be fraudulent, the filer of the financing statement must pay the costs and expenses incurred by the debtor in the action.
Additionally and alternatively, a debtor named in a bogus financing statement may file an action against the person that filed it seeking appropriate equitable relief or damages, including, but not limited to, an order declaring the financing statement ineffective and ordering the office of the secretary of state to terminate the financing statement, and awarding the debtor reasonable attorney fees.
As in Texas, Michigan makes it a felony to knowingly or intentionally file a false or fraudulent financing statement, with penalties upon conviction of up to five years in prison and/or a fine of up to $2,500.00.
Regardless of motive, those who file bogus UCC financing statements inflict significant financial and practical damage on their victims. Fortunately, the law provides robust mechanisms that allow debtors to fight back and imposes severe penalties on those who abuse these documents. If you have questions or concerns about a fraudulent or questionable UCC filing, please contact Robert Horwitz or Jonathan Sollish at Maddin Hauser.