Default

Question 1

What causes default?

Answer 1

Breach of the security agreement

Question 2

What are the consequences of default?

Answer 2

The secured party may seek (1) possession to resell or retain (2) judgment based on the obligation

Question 3

If a secured party ignores default, what may happen?

Answer 3

It could be treated as waiver

Question 4

Can a secured party remove a fixture if there’s default?

Answer 4

Yes

Question 5

Can a secured party remove an accession if there’s default?

Answer 5

Yes

Question 6

What are the limits on repossessing collateral?

Answer 6

1. Cannot breach the peace

2. Can render equipment unusable

Question 7

Is a secured party required to give notice of default?

Answer 7

No

Question 8

Is a secured party required to give notice of an intent to repossess?

Answer 8

No

Question 9

When property is disposed, how must the disposition be conducted?

Answer 9

In a commercially reasonable manner as to method, manner, time, and place

Question 10

Who must be notified of the disposition?

Answer 10

1. Debtor
2. Secondary obligor
3. Any other secured party or lien holder
4. Any party who has notified the secured party of a claim or interest in the collateral

Question 11

When must interest parties be notified of the disposition?

Answer 11

At least 10 days before

Question 12

Under what circumstances is no notification of disposition permissible?

Answer 12

1. Perishable goods or speedy decline in value
2. Collateral is customarily sold on a recognized market
3. The person has waived their right to notice in an authenticated writing

Question 13

How are proceeds from a disposition allocated?

Answer 13

First to disposition expenses, then to satisfy the secured obligation, then to satisfy subordinate SIs, and remainder to the debtor

Question 14

When does a debtor consent to foreclosure?

Answer 14

Either with an authenticated record or, if foreclosing in full satisfaction, by a failure to object within 20 days of the secured party’s proposal to accept the collateral

Question 15

For consumer debtors, when can a secured party not foreclose?

Answer 15

When the consumer has paid at least 60% of the cash price for a PMSI; if not a PMSI, 60% of the obligation

The goods must be sold, not kept in satisfaction

Question 16

What remedies are available against a secured party who fails to comply?

Answer 16

1. Injunction
2. Actual damages for losses suffered by the debtor
3. For consumer goods, may recover an amount not less than the credit service charge, plus 10% of the principal, plus 10% of cash price, even if damages are less