Enforcement

Question 1

Self-Help Repossession

Answer 1

If a debtor defaults on a secured transaction, the creditor can repossess the collateral. A secured party can use self-help to repossess collateral only if it can do so without a breach of the peace. Article 9 does not define breach of the peace, but generally repossession over a debtor’s protest qualifies.

Question 2

Redemption

Answer 2

A debtor has a right to redeem collateral after a default. The right to redeem collateral can be waived, but only after there has been a default.

Question 3

Acceleration clause

Answer 3

It is permissible for a clause to accelerate all payments in the event of a default, but once the debtor offers to pay the entire amount due, the secured party must allow the debtor to redeem

Question 4

Liability of a secured party

Answer 4

A secured party will be liable to the debtor for any damages caused by a failure to follow Article 9 rules. A secured party will be prohibited from collecting any deficiency if any Article 9 default rules are broken unless the secured party can show that the breach did not cause the deficiency.

Question 5

Sale of collateral - proceeds distribution and affect on junior interests

Answer 5

On sale, proceeds go first to the expenses of the repossession and sale, then to satisfy the debt foreclosed, and any remaining funds go to junior interests. If a secured party sells the collateral after default by the debtor, all subordinate security interests in the collateral are discharged.