Default

Question 1

A default occurs whenever what happens?

Answer 1

Debtor fails to perform an obligation

generally, fails to pay

Question 2

What are secured parties rights when a default occurs?

2

Answer 2

1. sue on the debt; or,

2. foreclose against the collateral

Question 3

A secured party can use self-help repossession if?

Answer 3

You can repossess without a breach of the peace (i.e. any act that is likely to lead to violence)

Question 4

If a secured party cannot use self-help repossession, what can they use?

Answer 4

Court assisted repossession

Question 5

If the collateral consists of accounts receivable, instruments, or chattel paper the secured party may, upon the debtor’s de-fault, what must happen to collect?

Answer 5

Notify the person obligated on the collateral to make payment to the secured party

Question 6

What is the debtor’s right to redeem collateral?

Answer 6

1. Redeem before the collateral is sold, and,

2. the debtor can redeem if they pay all the amounts owed (including accelerated amounts)

Question 7

When can a debtor waive the right of redemption?

Answer 7

1. after default
\+
2. in writing
\+
3. signed

Question 8

How must a secured party sell foreclosed personal property?

Answer 8

1. they must sell it by commercially reasonable means

2. give written notice to debtor and any other secured parties (≠stocks or pershible goods)

Question 9

If the sale of collateral does not cover the debt of the debtor, what happens?

Answer 9

The debtor is in deficiency

Question 10

How to payout the proceeds of foreclosure?

Answer 10

1. (-) reasonable expenses in getting and selling collateral
2. Secured creditors
3. Unsecured creditors
4. Debtor (if surplus) or Deficiency (if no surplus

Question 11

If there is a violation of any of the default rules, what the is presumption?

Answer 11

There is a rebuttable presumption that if the secured party followed all of the procedures, that there would not have been a deficiency

Deficiency eliminated!