Default and Enforcement

Question 1

Default

Answer 1

Not defined by Article 9

Refer to the security agreement and applicable contract law to determine what constitutes a
default

Question 2

Consequences of Default

Answer 2

Secured party can:

(1) Seek possession of the collateral and sell it/retain it;
(2) Sue for judgment based on the obligation

Question 3

Types of Repossession

Answer 3

(1) Judicial

(2) Self-help

Question 4

Self-Help Repossession

Answer 4

CANNOT breach the peace

Question 5

Repossession of Large Equipment

Answer 5

Can be rendered unusable in lieu of repossession

Question 6

Disposition of Collateral: Standard for Dispostion

Answer 6

All aspects of disposition must be COMMERCIALLY REASONABLE

Question 7

Disposition of Collateral: Factors to Determine if Commercially Reasonable Standard Met

Answer 7

(1) Whether sold on RETAIL OR WHOLESALE MARKET;
(2) NUMBER OF BIDS;
(3) TIME AND PLACE to bring satisfactory turnout of bidders; and
(4) PRICE RECEIVED at sale

Question 8

Disposition of Collateral: Notice

Answer 8

Secured party must send AUTHENTICATED NOTICE to:

(1) Debtor
(2) Secondary obligors
(3) Other secured parties
(4) Anyone else from whom the secured party has received notice of a claim or interest in the collateral

Question 9

Order of Distribution for Disposition Proceeds

Answer 9

(1) Reasonable expenses
(2) Pay debt to foreclosing secured party
(3) Pay subordinate SIs
(4) Debtor

Question 10

Acceptance of Collateral: In General

Answer 10

Secured party may accept the collateral in FULL or PARTIAL satisfaction of the debt

Question 11

Acceptance of Collateral: Full Satisfaction

Answer 11

(1) Debtor CONSENTS in authenticated record; or

(2) Debtor DOES NOT OBJECT to secured party’s proposal to accept collateral within 20 DAYS after proposal sent

Question 12

Acceptance of Collateral: 60% Rule

Answer 12

If the goods are consumer goods and the debtor has paid back 60% OR MORE OF THE DEBT, then the goods MUST BE SOLD

Acceptance is not permitted

Question 13

Acceptance of Collateral: Partial Satisfaction

Answer 13

Debtor must CONSENT after default to acceptance in an authenticated record

Silence is not permitted

Question 14

Redemptions Rights: In General

Answer 14

Collateral may be redeemed by paying the ENTIRE SECURED OBLIGATION and expenses

Question 15

Redemptions Rights: Timing

Answer 15

Must occur BEFORE SECURED PARTY HAS SOLD THE COLLATERAL OR ACCEPTED THE COLLATERAL

Question 16

Remedies for Secured Party’s Failure to Comply

Answer 16

(1) Injunctive relief
(2) Actual damages
(3) Statutory damages