Default Flashcards
Where is default defined?
In the specific contract.
What are the 6 default remedies?
1) Self help repossession
2) Judicial action repossession
3) Strict foreclosure
4) Sale
5) Action for deficiency judgment
6) Limited right of redemption
Explain a self help repossession
It is permissible as long as the creditor doesn’t breach the peace. Breach of peace is when secured party’s actions are likely to cause violence and any protest of the debtor constitutes a breach.
Explain a judicial action repossession
If secured party chooses not to self help, they can get a judicial writ ordering sherif to obtain possession of collateral and deliver to secured party.
What is a strict foreclosure?
Occurs when the secured party retains the collateral in full satisfaction of debt still owed.
What is the procedure for strict foreclosure?
1) Send written proposal to retain collateral in satisfaction of debt
2) Notice sent to secondary obligor when collateral consumer goods, when not, sent to debtor and other secured parties as well as perfected creditors and secondary obligators.
3) If any party objects within 20 days, strict foreclosure will not be allowed.
4) If collateral is consumer goods and debtor paid 60% of loan (in event of non PMSI) and 60% of cash price in event of PMSI, foreclosure is not allowed.
What must the creditor do when the sell the collateral?
Secure party may sell collateral and apply proceeds to debt. You can choose whether public or private but it must be commercially reasonable and reasonable notice must be given. Secured party can buy at public not private sale.
What must the notice of sale say?
Must say type of sale and place if public and private must say date after occurs. For consumer goods additional provisions required including calculation of deficiency and how debtor can redeem.
What is the limited right of redemption?
Cuts off once secured party has resold or completed strict foreclosure. You must pay your missed payments plus interest and creditors’ reasonable expenses. If contains acceleration clause, still must pay off entire debt and interest/expenses.
