Right to Dispose of Collateral

Question 1

What can a creditor do upon default?

Answer 1

Generally, upon default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or in any commercially reasonable manner.

Question 2

What are the rule pertaining to a non-judicial foreclosure sale of collateral?

Answer 2

Upon default, a secured party may dispose of collateral in its possession by way of a sale as long as it is commercially reasonable as to the method, manner, time, place and terms.

Question 3

Regarding a non-judicial foreclosure sale of collateral, what does Article 9 require?

Answer 3

Article 9 requires the secured party to send reasonable notification of the time and place of any public sale to the debtor and any secondary obligor in a timely manner such that the debtor and any secondary obligor have time to take appropriate steps to protect their interest (e.g., by taking part in the sale.)

Question 4

What is the purchase rule for a strict foreclosure?

Answer 4

Unless otherwise agreed, a secured party may purchase the collateral at a public or private sale ONLY IF the collateral is of a kind that is customarily sold on a recognized market (e.g., stock market) or the subject of widely distributed standard price quotations.