Default Flashcards
Default defined
Debtor has breached the contract
- not defined in article 9; defined in the contract
- article 9 provides remedies
Available Remedies
Self-Help Repossession Repossession by Judicial Action Strict Foreclosure Sale The action for Deficiency Judgment
Self-Help Repossession
permissible so long as creditor does not breach peace. A breach of the peace occurs when the secured party’s actions are likely to cause violence.
- Not available over any protest of debtor
- Impersonating law enforcement is considered constructive force and therefore has breached peace
Self-Help Repossession when collateral is inside home
home enjoys zone of privacy
SP must not enter debtor’s home without voluntary & contemporaneous consent
Self-Help Repossession when collateral is outside home
more lateral for creditor
may take collateral as long as there is no objection
Repossession by judicial action
May get writ of replevin ordering the sheriff to retain possession
Strict Foreclosure
Occurs when the secured party retains the collateral in full satisfaction of the debt still owed.
How is strict foreclosure accomplished?
Secured party must send a written proposal to retain the collateral in satisfaction of the debt.
when consumer goods- notice is sent to debtor & secondary obligors
when the collateral is not consumer goods- notice is sent to debtor and other secured parties who have told the foreclosing creditor of their security interest in the collateral as well as perfected creditors and secondary obligors
What if any of the notified parties object to the strict foreclosure?
Pissant Rule- If objection with 20 days after notice is sent, strict foreclosure will not be allowed. Instead, collateral must be disposed of by sale.
Consumer goods and the 60% rule
If the collateral is consumer goods and the debtor has paid 60% of the loan in the event of a non-PMSI or 60% of the cash price in the event of a PMSI, strict foreclosure is not allowed.
Instead, the secured party must sell the collateral within 90 days or be liable for conversion
Sale
The secured party may sell the collateral and apply the resale proceeds to the debt. Secured party chooses whether the sale is public or private.
Two governing guideposts:
1- every aspect of the sale must be commercially reasonable
2- prior to sale, notice must be sent
Sale notice- standard
Article 9 provides standard notice forms which, if used, are presumptively commercially reasonable.
Sale- Consumer goods v. non-consumer goods
Consumer goods- notice must be sent to debtor and secondary obligors. Also must include additional consumer-protective provisions such as how to calculate any deficiency and how dector can redeem.
Non-consumer goods- notice must be sent to debtor, known other secured parties, perfected creditors and secondary obligors.
Sale- Public v. Private notice
Public sale notice- time and place of sale
Private sale notice- must state time after which the sale will be made
How much advance notice is required for sale?
no bright line- standard is of commercial reasonableness
non-consumer goods- 10 days or more prior to sale is reasonable.
