Default

Question 1

Default

Answer 1

Article 9 does not define default - If default not specified look for:

• Late or missed payments
• Possible waiver by the secured party of late or missed payments

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. Should NOT take over possessor’s objection!

• If there is breach of the peace, repossessor can be liable for damages.

Question 3

Breach of the Peace

Answer 3

Look for acts that are likely to lead to violence

Question 4

Retention of Collateral

Answer 4

AKA - Strict Foreclosure

After default and repossession, the secured party may propose retaining the collateral in FULL or PARTIAL satisfaction of the debt.
To do so, you must send notice/proposal to:
1. Any other secured party from whom the foreclosing party has received notice of claim to foreclosure, and
2. Any other SP with perfected SI

Question 5

Resale of Collateral

Answer 5

After default, the secured party may sell or lease the collateral in its condition when repossessed or after reasonable preparation. The sale discharges the security interest under which the sale is being made and all subordinate security interests.

• You have to give notice to debtors, other security parties, sureties, etc.
• Notice not necessary when collateral is perishable or threatens to decline rapidly in value or is kind of ordinarily sold in a recognized market (e.g. stock)
• Debtor or surety may, after default, in an authenticated agreement waive the right to notice

Question 6

Content of Foreclosure Notice in Nonconsumer Transactions

Answer 6

1. Description of the debtor and secured party
2. A description of the collateral
3. The method of sale (public or private)
4. Statement that debtor is entitled to accounting for the unpaid indebtedness and the charge for performing the accounting, and
5. The time and place of any public sale or the time after which a private sale will be made.

Question 7

Content of Foreclosure Notice in Consumer Transactions

Answer 7

Must contain everything required in nonconsumer transaction, and:

1. Description of the recipeient’s liability for a deficency
2. A phone number from which the recipient can discover the cost of redeeming the collateral, and
3. A phone number or mailing address from which the recipient can get additional information concerning the sale

Question 8

Secured Party’s Right to Deficiency

Answer 8

-If compliance with Article 9 Secured party can seek deficiency after sale

• However if there is failure to comply with resale requirements of Article 9 - The value of collateral is presumed equal to the amount of the debt unless the secured party proves otherwise.
  (e. g., doesn’t give notice or doesn’t observe reasonable commercial practices)

Question 9

Debtor’s Right of Redemption

Answer 9

• Anytime before the SP has resold the collateral or has entered in a K for its disposition, the D may redeem the collateral.
• To do so the D must tender fulfillment of all obligations secured by the collateral
• Most security agreements have acceleration clause so typically D must tender entire balance to redeem

Question 10

Nonjudicial Steps Creditor Can Take In Order to Enforce Lien Rights in Collateral

Answer 10

1. Creditor can repossess its collateral by any means without providing prior notice, so long as it avoids breaching the peace.
2. Then creditor can proceed to dispose of the collateral by any “commercially reasonable” means; however, must provide timely notice to debtor and other creditors with perfected security interest in same collateral
3. Finally, if sale proceeds insufficient to pay the sale costs, repossession and maintenance expenses for the collateral, and the entirely of creditor’s secured claim, creditor can bring deficiency claim against debtor