Default & Right To Repossess Or collect Flashcards
Upon default, may a party take possession of collateral without judicial process?
Yes, may even collect on non goods via authenticated notification if defined in security agreement (not defined in Art 9).
Can a party reclaim possession through self help?
Yes, as long as no breach of the peace occurs.
What is breach of the peace mean and when is there a breach?
Repossession made over debtor’s protest.
Violence or threats or breaking or entering will breach the peace.
However, simple trespass will be permissible.
Upon defaulting on payments, can a party unlock and hot wire a car used as collateral if the car is sitting in the driveway?
Yes.
A loans B $10,000, for which A receives a promissory note; A takes out a loan from C for $5000 using B’a note as collateral; A defaults on C’s loan - what can C do in this instance?
C may notify B of A’s default and require that B pay C on the promissory note.
Upon default, what can a secured party do with the collateral?
He can dispose of collateral (sell, lease) as long as it’s done in a commercially reasonable manner.
Is notice to debtor required upon disposition (sale, lease) of collateral?
Yes, notice of sale must be given to debtor in:
authenticated writing and
must be sent in a reasonable time before sale.
What is the effect of a disposition (sale)?
The sale discharges SI as well as any subordinate SIs and liens.
If the disposition (sale) of collateral creates a surplus, what happens to that surplus?
If sale generates more than remaining obligation, secured party must pay debtor that surplus.
If disposition (sale) of collateral creates a deficiency, is debtor still liable for the deficiency?
Yes.
Who is liable if there is a surplus or deficiency concerning accounts, chattel paper, payment intangibles, or promissory notes?
No one.
Does a debtor generally have a right to redeem?
Yes, he (or any other secured party) may redeem collateral by paying all remaining obligations plus reasonable expenses incurred for repossession.
Note: right to redeem is only valid before secured party sells or discharges debt by keeping collateral.
What is a strict foreclosure?
In a strict foreclosure, upon default the foreclosing party may keep collateral (as opposed to selling it) to fully or partially satisfy the debt.
Requirements for strict foreclosure
Debtor must consent to strict foreclosure: if debtor fails to respond within 20 days after receiving notice of strict foreclosure, consent by default.
Secured party must send notice of intent to keep collateral to all secured parties and debtor
No notified party objects within 20 days: if there’s even one objection, then collateral must be disposed through sale.
3 Remedies available if secured party fails to comply with Art 9?
Actual Damages: debtor can recover damages to put her in position she would have been without violation.
Damages for consumer goods: debtor to get at least 10% of cash price plus interest.
Loss of deficiency judgment: secured party may lose right to deficiency judgment.
