Default Flashcards
SP right upon default
Upon default, the SP may repossess tangible collateral if it can do so without breach of peace (i.e., likely to cause violence)
Debtor right to redeem
Debtor has right to redeem the collateral by paying the amount of the obligation, interest, and reasonable expenses and attorneys’ fees caused by the default
Waiving right to redeem
Debtor can waive the right to redemption in writing AFTER default only
Disposition after default
o All aspects of disposition of the collateral must be commercially reasonable
o There must be notice before disposition
Notice of disposition
SP must send notice to Debtor, any filed SPs, and any other person for whom the SP has received notification of an interest in the collateral
Timing of notice of disposition
Notice must be sent within a reasonable time before the sale
§ 10 days is always sufficient in commercial transactions
Contents of disposition notice for non-consumer transaction
o description of Debtor and SP;
o description of the collateral;
o method of intended disposition;
o a statement that Debtor is entitled to an accounting of all unpaid
indebtedness; and
o the time and place of a public sale, or when the collateral will be sold in a
private sale
Contents of notice of disposition for consumer transaction
All requirements of non-consumer +
o description of any liability for a deficiency;
o phone number to call to obtain the amount required to redeem the
collateral; and
o phone number or mailing address to find out additional information that is
available
Order of distributing proceeds
o First, all reasonable expenses, including attorneys’ fees, incurred by the SP in the process of disposing of the collateral
o Second, pay the outstanding amount due to the SP that foreclosed on and sold the collateral
o Third, pay subordinate SIs or liens on the collateral if they sent an authenticated demand before disposal
o Finally, any surplus goes to Debtor; if all debts are not covered by the sales, the SPs can obtain a deficiency judgment
Deficiency
Difference between the foreclosure price and the amount due on the SI
Deficiency rule if sale unreasonable
If the sale is commercially unreasonable, the deficiency can be reduced
Reducing deficiency
In non-consumer transactions, we reduce the deficiency by the amount between the outstanding amount of the loan and the amount the collateral would have sold for in a commercial reasonable sale
Rebuttable presumption for reducing deficiencies
Rebuttable presumption: presume the difference equals $0, so Debtor does not owe a deficiency
Rebutting the presumption: SP can rebut the presumption by showing the collateral is worth less than the outstanding amount of the debt
