Upon graduating from high school, Sally Samuels decided to follow her dream and open her very own bakery. Sally’s Sweets was such a success that Sally had trouble keeping enough pastries on the shelf for sale. She therefore decided to take out a loan from Boone County National Bank (BCNB) to cover the costs associated with expanding the bakery. BCNB took a security interest in all Sally’s equipment, including after-acquired, and properly filed a financing statement on April 1, 2006.

The expansion was a financial success — so much so that Sally was sought after whenever she was spotted in public. Sally was frustrated with the publicity but didn’t want to see her dream go under. She therefore decided to give both her look and her name a makeover. On April 1, 2007, she changed her hair color, had plastic surgery and changed her name to Skylar Jones. What Sally hadn’t anticipated was that her new look would lead to an explosion of her adventurous side. As a result, Sally neglected the business to the point that she had to file for bankruptcy on September 1, 2007.

When BCNB found out about Sally’s petition for bankruptcy, BCNB called you to determine whether its April 1, 2006 financing statement was still effective to perfect its security interest in Sally’s equipment as of September 1, 2007. Which of the following statements is correct?

1) BCNB’s security interest in Sally’s equipment is still perfected as of September 1, 2007, because Sally’s name change did not render BCNB’s April 1, 2006, financing statement ineffective.

2) Because Sally’s name change rendered the April 1, 2006 financing statement seriously misleading, BCNB’s security interest is no longer perfected, but only with respect to equipment Sally acquired after her name change (after April 1, 2007).

3) Because Sally's name change rendered the April 1, 2006 financing statement seriously misleading, BCNB’s security interest is no longer perfected as to any equipment except for the equipment that Sally owned at the time she entered into the security agreement.

4) Because Sally's name change rendered the April 1, 2006 financing statement seriously misleading, BCNB’s security interest is no longer perfected, but only with respect to equipment Sally acquired after August 1, 2007.