Default

Question 1

Default Definition

Answer 1

The right of the secured party to proceed against collateral is normally triggered by default. But default is not defined in Article 9. Typically, the grounds of default are specified in the security agreement.

Question 2

Self-help repossession

Answer 2

After default, the secured party is entitled to take possession of the collateral without judicial process if this can be done without “breach of the peace.” When a secured party breaches the peace, he loses the authorization to repossess, may be sued for conversion, and is liable for actual damages

Question 3

Breach of the peace

Answer 3

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

Question 4

Retention of the Collateral

Answer 4

After default and repossession, the secured party may propose retaining the collateral in full or partial satisfaction of the debt

1) secured party must send its proposal to any other secured party from whom the foreclosing party has received notice of a claim to the collateral. If a notified party objects within 20 days after the secured party sent notice, the collateral must be disposed of by sale
2) Secured party must also obtain the debtor’s consent.

Question 5

Resale of Collateral

Answer 5

After default, the secured party may sell, lease, license, or otherwise dispose of the collateral in its condition when repossessed or after reasonable preparation. The sale may either be public or private. The sale discharges the security interest under which the sale is being made and all subordinate security interests. The purchaser is still subject to superior security interests.

Question 6

Reasonable notification

Answer 6

Reasonable notice that is authenticated by the secured party (cannot be oral) must be given to the debtor and any sureties on the debt, and (except for consumer goods), to any other secured parties.

Question 7

Timeliness of Notifciation

Answer 7

Notification must be sent within a reasonable time before the sale. In nonconsumer transactions, notice is deemed to be sent within reasonable time if it is sent 10 days or more before the time of sale.

Question 8

Content of Notification

Answer 8

For a public sale, notice of the time and place of sale is required.

For a private sale, notice of the time after which the sale will occur must be given

Extra info is required for consumer goods

Question 9

Commercially reasonable sale

Answer 9

Every aspect of the sale (including the method, manner, time, place, and terms) must be commercially reasonable.

Question 10

Secured Party Buying Collateral

Answer 10

The secured party may buy at any public sale, but may buy at a private sale only if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations

Question 11

Secured Party’s Right to Deficieny

Answer 11

Secured creditor can get a deficiency judgment from debtor if collateral does not sell for the amount of the debt.

Question 12

Failure to Comply with Resale Requirements

Answer 12

If the secured party fails to conduct a commercially reasonable sale, there is a rebuttable presumption that the sale proceeds equal the amount of the debt. No right to deficiency judgment.

Question 13

Debtor’s Right to Redeem

Answer 13

Any time before the secured party has resold the collateral or has entered into a contract for its disposition, the debtor may redeem the collateral. To do so, the debtor must tender fulfillment of all obligations secured by the collateral. B/c most security agreements contain an acceleration clause, the debtor typically must tender the entire balance in order to redeem.