Default

Question 1

What are secured party’s rights upon debtor’s default?

Answer 1

Upon default, the secured party may repossess tangible collateral if it can do so without breach of the peace

Question 2

When may secured party repossess the tangible collateral of the debtor?

Answer 2

If the secured party can repossess the collateral without breaching the peace

Question 3

What is required for repossession if secured party can’t repossess the collateral themselves without breaching the peace?

Answer 3

The secured party must file an action for replevin and the sheriff will seize the property

Question 4

What are debtor’s rights of redemption?

Answer 4

Debtor has the right to redeem the collateral by paying the amount of the obligation, interest and reasonable expenses as well as attorney fees caused by default

Question 5

How may debtor waive the right to redemption?

Answer 5

Debtor can waive the right to redemption in writing after the default only

Question 6

What are requirements regarding disposition of collateral after default

Answer 6

1. all aspects of disposition of collateral must be commercially reasonable
2. notice is given before disposition

Question 7

Who must secured party give notice regarding disposition of collateral?

Answer 7

Secured party must send notice to debtor, any filed secured parties, and any other person for whom the secured party has received notification of an interest in the collateral

Question 8

When must notice be provided prior to a disposition?

Answer 8

Notice must be sent within a reasonable time before the sale, with 10 days always being sufficient in commercial transactions

Question 9

What are requirements regarding the contents of notice for non-consumer transactions?

Answer 9

1. description of the debtor and the secured party
2. description of the collateral
3. method of intended disposition
4. statement that the debtor is entitled to an accounting of all unpaid indebtedness
5. the time and place of a public sale, or when the collateral will be sold in a private sale

Question 10

What are requirements regarding the contents of notice for consumer transactions?

Answer 10

1. description of the debtor and the secured party
2. description of the collateral
3. method of intended disposition
4. statement that the debtor is entitled to an accounting of all unpaid indebtedness
5. the time and place of a public sale, or when the collateral will be sold in a private sale
6. description of any liability for a deficiency
7. phone number to call to obtain the amount required to redeem the collateral
8. phone number or mailing address to find out additional information that is available

Question 11

What is the order of proceed distribution upon default?

Answer 11

1. reasonable expenses, including attorney’s fees, incurred by the secured party in the process of disposing of the collateral
2. outstanding amount due to secured party that foreclosed on the collateral
3. subordinate security interests or liens on collateral if those parties sent an authenticated demand before disposal
4. any remainder to the debtor

Question 12

What is a deficiency?

Answer 12

A deficiency is the difference between the foreclosure price and the amount due on the security interest

Question 13

When may secured parties seek deficiency judgements?

Answer 13

Secured parties can obtain deficiency judgements if not all debts are covered by the foreclosure sale

Question 14

When would a deficiency be reduced?

Answer 14

If a sale is commercially unreasonable

Question 15

How much is a deficiency reduced in non-consumer disposition transactions that were commercially unreasonable

Answer 15

In non-consumer transactions the deficiency is reduced by the amount between the outstanding amount of the loan, and the amount the collateral would have been sold for in a commercially reasonable sale

Question 16

What is rebuttable presumption regarding deficiency judgements of commercially unreasonable sales?

Answer 16

There is a rebuttable presumption that the difference between the outstanding amount of the loan and the amount the collateral would have been sold for in a commercially reasonable sale is $0, such that debtor doesn’t owe a deficiency judgement

Question 17

How may presumption regarding deficiency judgement reductions of unreasonable dispositions be rebutted?

Answer 17

Secured party can rebut the presumption that deficiency judgement is $0 by showing that the collateral is worth less than the outstanding amount of the debt