Debtor's Rights

Question 1

What can the debtor do if the creditor makes a non-complying disposition of collateral?

Answer 1

When a creditor makes a non-complying disposition of collateral under Article 9, the debtor can:

1. Recover actual damages;
2. Recover statutory damages; OR
3. Be subject to judicially mandated disposition of the collateral. (court can order creditor to allow debtor to redeem, or conduct a public sale).

Question 2

What is the right of redemption?

Answer 2

Generally, a debtor or any secondary obligor has the right to redeem collateral until the secured party has disposed of it.

Question 3

What must a debtor do to redeem collateral?

Answer 3

To redeem collateral, the debtor must:

1. Fulfill all obligations secured by the collateral; AND
2. Pay the reasonable expenses and attorney fees.

Question 4

What is a surplus?

Answer 4

If the sale of collateral brings in MORE than the underlying obligation, the SECURED PARTY MUST PAY THE DEBTOR FOR ANY SURPLUS.

Question 5

What is a deficiency?

Answer 5

When the sale brings in LESS than the underlying obligation, the obligor is liable for any deficiency.

Question 6

True or false: Neither side is liable for any surplus or deficiency if the underlying transaction involves the sale of accounts, chattel paper, payment intangibles, or promissory notes.

Answer 6

True