Default

Question 1

Default

Answer 1

Whatever the SA states is default

Question 2

Self-Help Repossession

Answer 2

SP is entitled to take possession of property without judicial process if it can be done without breaching the peace

SP is entitled to make equipment unusable if they can do so without breach of peace

Question 3

Breach of Peace

Answer 3

Any conduct by the secured party that has the potential to lead to violence is a breach of the peace. Generally, physical presence by the debtor (or a representative of the debtor) plus verbal objection is enough to create a breach of the peace.

Question 4

Self-Help in Accounts

Answer 4

If the debtor defaults and the collateral is accounts, the secured creditor can notify (in a signed writing) the persons owing money to the debtor (i.e., the account debtors) to make payment to the secured party rather than to the debtor. Upon notification, the account debtor must pay the secured creditor rather than the debtor. Payment to the debtor will not discharge the
obligation.

Question 5

Strict Foreclosure

Answer 5

When SP retains collateral for full or partial satisfaction of debt

Requires:
SP must propose to all other SP with claims, and if any object within 20 days must sell
SP must get debtor’s consent by either agreeing in an authenticated record after default or if full satisfaction, failure to make an authenticated objection within 20 days of notice

Question 6

Resale of Collateral

Answer 6

After default, SP may dispose of collateral and discharges the S.I. to all junior claims but buyer takes subject to senior claims

Question 7

Resale of Collateral Requirements

Answer 7

1. Reasonable authenticated notification of sale to debtor and any other secured parties sent within a reasonable time before the sale (10 days) and includes time and place of sale and information of collateral
2. Every aspect of the sale must be commercially reasonable
3. Proceeds of the sale repay the costs, debt of foreclosing creditor, lower priority creditors, then debtor gets surplus if available

Question 8

SP right to deficiency judgment

Answer 8

If debtor is consumer, SP must send an explanation of amount still owed

Question 9

Failure to comply with Code rules

Answer 9

1. SP liable for actual damages caused by failure
2. If collateral is consumer goods and secured creditor violates the Code’s rule on default, debtor is entitled to minimum of 10% case price plus amount equal to all interest charges paid
3. If the secured party fails to follow the Code’s rules on default, there is a rebuttable presumption that the sale proceeds equal the amount of the debt. In other words, the secured party presumptively loses any deficiency.

Question 10

Debtor’s Right to Redeem

Answer 10

Any time before the secured party has resold the collateral or has entered
into a contract for its disposition, or the obligation has been discharged by
the secured party’s retention of the collateral, the debtor may redeem the
collateral. To do so, the debtor must tender fulfillment of all obligations
secured by the collateral. Because most security agreements contain an
acceleration clause, the debtor typically must tender the entire balance in
order to redeem. (An acceleration clause gives the creditor the option to
declare the entire loan balance due when there is any default.)