Default

Question 1

What are the typical consequences of default?

Answer 1

the secured party may (i) seek possession of the collateral and sell it or retain it, or (ii) sue for a judgment based on the obligation

Question 2

What is required of the secured party to possess collateral in the event of a default?

Answer 2

No notice is required. Secured party must not breach the peace but may render collateral equipment inoperable.

Question 3

What is required for the disposition of collateral?

Answer 3

all aspects of the disposition must be commercially
reasonable (method, manner, time, and place)

No specific price or timing is required

Question 4

What notice is required prior to disposition?

Answer 4

he secured party is generally required to send an authenticated notification of disposition to

(i) debtor,
(ii) any secondary obligor,
(iii) any other secured party or lien holder who has an SI perfected by filing,
and (iv) any party who has notified the secured party of a claim or interest in the collateral

at least 10 days before disposition

Question 5

How are cash proceeds distributed in a foreclosure sale?

Answer 5

first to reasonable disposition expenses, then to satisfy the secured obligation, then to satisfy subordinate SIs (if the secured party made an authenticated demand before distribution is complete), and any remainder to the debtor

generally, the debtor is entitled to any surplus and is liable for any deficiency

Question 6

What rights are gained by a transferee in a collateral sale?

Answer 6

the sale of the collateral gives the buyer at the sale all of the debtor’s rights in the collateral; the collateral remains subject to any senior SI

Junior security interests are “wiped out” with regard to the collateral