Default

Question 1

What is a debtor’s redemption rights?

Answer 1

May redeem entire collateral by paying entire debt and expenses, before item is sold or accepted.

Cannot be waived before default.

Question 2

What are the two ways collateral can be repossessed?

Answer 2

1. Judicial Process (Replevin)
2. Self-Help
   - Secured party cannot breach peace (i.e. bringing an officer who is not there by judicial authority, breaking into home, deception, etc.).
   - Trespass is ok, without a confrontation (dead of night).

Note: for large equipment = rendered unusable and sold.

Question 3

What are the rules for disposition of chattel?

Answer 3

Commercially Reasonable Standard
- Sold in usual manner in market
- Sold at price current in market
- Otherwise in conformity with the reasonable commercial practices among dealer in that type of collateral.
Note: price alone not determinative, but a very low price has more scrutiny.

Details of Disposition

• Public or private.
• A secured party can buy the collateral at a public sale, unless price is fixed (stock exchange), or subject to standard price quotes.
• No specific timetables, just commercially reasonable.

Notice

• When? Commercially reasonable, if non-commercial, at least 10 days before sale.
• Exceptions: perishable, sold on recognized market (NYSE), or waived after default.
• Notice given to debtor and secondary obligors, and other secured parties, and anyone else who has notice of claim.
• Must include names, description of collateral, accounting, and phone number.

Question 4

What kind of remedies can be sought for a secured party’s failure to comply?

Answer 4

Injunctive Relief

Actual Damages

Statutory Damages

• Article 9 may prevent a claim of deficiency.
• If commercial: the rebuttable presumption rule. If the secured party did not sell in a commercially reasonable manner, then they are not entitled to deficiency unless they can prove a sale that complied with Article 9 would have still have created deficiency.
• if consumer: some courts follow and absolute bar rule.

Tort of Conversion = for improper repossession.

Question 5

What can a secured party do when there is a default?

Answer 5

• Seek possession of tangible collateral and either sell or retain it in satisfaction of obligation owed.
• Abandon Article 9 rights, and instead obtain a judgement against the debtor.
• Pursue other causes of action agreed on bu the debtor and secured party.

Question 6

What are the special enforcement rules for fixtures, accessions, and rights to repayment?

Answer 6

Fixtures
- If a secured party has priority, may remove the fixture from real estate, but will be liable for cost of repairing damage, but not liable for diminution in value.

Accessions
- The secured party with priority allowed to remove accession from other goods.

Rights to Repayment
- The secured parry can step into the debtors shows to collect amounts owing to account debtors.
- Once account debtor gets notice, she cannot discharge debt by paying debtor directly. Must pay the secured party.
Note: account debtor can raise debtor’s defenses.

Question 7

How can a secured party accept collateral as a type of enforcement?

Answer 7

Full or partial satisfaction.

Full

• Debtor must consent after default to the acceptance in an authenticated record.
• Acceptance by silence ok if no objection within 20 days.
• For consumer goods: only accept in full. Also the 60% rule. If debtor has paid back at least 60% or more, goods must be sold unless waived in authenticated record.

Partial

• Debtor consents in authenticated record.
• Consent by silence is not allowed.
• Not allowed in consumer transactions.