Default Flashcards
What is a debtor default?
It is what the security agreement says it is, as article 9 does not prescribe this.
Once a debtor defaults, can the creditor engage in self-help repossession?
Only if it would not breach the peace, which means any actions likely to cause violence.
Since this is a debtor-protected standard, any repossession made over mild protest would be a breach of the peace.
If a creditor breaks into someone’s property at night to repossess collateral or dresses in way to make them look like law enforcement, what might this constitute?
Constructive force.
What is the consequence for a creditor who repossesses an item despite protests from the debtor?
Criminal and civil penalties for misconduct.
If the creditor does not engage in self-help repossession, what else can they do?
Seek a judicial writ, ordering the sheriff to obtain possession of the collateral and deliver it to the secured party.
What are the secured party’s options with the collateral, once in possession?
STRICTLY FORECLOSE, (so keep collateral in satisfaction of the debt)
SELL the goods and use the proceeds to set-off the debt
DEFICIENCY JUDGMENT
When might strict foreclosure be appropriate?
Creditor needs that particular collateral or the value of it closely matches the debt still owed.
What does the creditor need to do to strictly foreclose?
Send a written proposal to retain the collateral in satisfaction of the debt.
For consumer goods = notice sent to DEBTOR and SECONDARY OBLIGORS.
Non-consumer goods = notice to DEBTOR and other SECURED PARTIES who told the foreclosing creditor about their interest in the collateral. Plus PERFECTED CREDITORS and SECONDARY OBLIGORS.
Once notified of the foreclosure, the interested parties have the right to what? What is the result?
Object within 20 days after notice is sent.
Objection = strict foreclosure not permitted.
What is the 60% (or more) rule for consumer goods when it comes to strict foreclosure?
If debtor has paid +60% of the loan, strict foreclosure is not permitted.
Instead the secured party must sell the collateral within 90 days. Otherwise liable for conversion.
What are the two Article 9 rules about sale?
- Every aspect of the sale must be commercially reasonable
- Prior to sale, notice must be sent to:
- For Non-consumer Goods = Debtor + All Secured Parties who advised creditor of their interest, Perfected Creditors and Secondary Obligors.
- For Consumer Goods = Debtor + Secondary Obligor. This notice must contain information about how creditor calculates deficiency judgment and how debtor can redeem.
A notice of private sale must include what mandatory information?
State the time after which the sale will be made.
A notice of a public sale must include what mandatory information?
Time and place of sale.
How much notice must for given for a sale involving consumer goods vs. non-consumer goods?
Consumer goods = commercial reasonable notice
Non-consumer goods = notice reasonable if sent at least 10 days before the sale.
At which sale can a secured party buy the collateral at re-sale?
Usually only public because of the potential for self-dealing or Fraud.
