Default

Question 1

Consequences of Default

Answer 1

Once a default has occurred, the secured party may:

i) Seek possession of the collateral and, in order to satisfy the obligor’s outstanding obligation, either:
a) Sell the collateral; or
b) Retain it in full or partial satisfaction of the obligation;

ii) Initiate a judicial action to obtain a judgment based on that obligation; or

iii) Subject to statutory limitations, pursue any course of action to which the debtor and obligor have agreed.

Question 2

Limitation on Means of Possession

Answer 2

without breach of the peace

Question 3

Commercially Reasonable Standard for Disposition

Answer 3

All aspects of the disposition of collateral must be conducted in a commercially reasonable manner. It is per se reasonable when:

i) In the usual manner on a recognized market, such as a stock exchange, that has standardized price quotations for fungible goods;

ii) At the price current in any recognized market at the time of disposition; or

iii) Otherwise in conformity with reasonable commercial practices among dealers in the type of property.

Question 4

Persons entitled to notice

Answer 4

Must be sent to:

1) the debtor,
2) any secondary obligor
3) any other secured party or lien holder who held a security interest that was perfected by filing or pursuant to statute,
4) any other party from whom the secured party has received authenticated notice of a claim

Question 5

Contents of notice

Answer 5

1) A description of the debtor and the secured party;
2) A description of the collateral;
3) A statement as to the method of disposition;
4) A statement that the debtor is entitled to an accounting of the unpaid indebtedness and the charge, if any, for providing that accounting; and
5) A statement of the time and place of a public disposition or the time after which a private disposition is to be made.

Question 6

Timeliness of noice

Answer 6

In general, the test for timeliness is reasonableness.

In a transaction other than a consumer transaction, when a secured party sends a notification of a disposition after default and at least 10 days before the earliest time for disposition set forth in the notification, the timeliness of the notice is reasonable.

Question 7

Application of Cash Proceeds from a Disposition

Answer 7

1) Reasonable expenses for collection and enforcement
2) Satisfaction of obligations secured by the security interest
3) Satisfaction of any subordinate security interests
4) The remainder of the proceeds to the debtor.