Default and Enforcement

Question 1

Enforcement rights in collateral

Answer 1

The SP can

1) Seek repossession of tangible collateral and either sell or retain it in satisfaction of the obligation owed

2) Abandon its Article 9 rights and instead obtain a judgment against the debtor

3) Pursue other courses of action in which the debtor and secured party have agreed

Question 2

Repossession of Collateral

Answer 2

Once there has been a default, the secured pay can repossess the collateral in one of two ways

1. By using the judicial process (replevin action)
2. By using self help, but cannot breach the peace

Question 3

Repossession of large equipment

Answer 3

Equipment that is hard to repossess can be rendered unusable in lieu of repossession and then can be sold on sight

Question 4

Disposition of collateral

Answer 4

Commercially reasonable standard

Once a secured party takes possession of the collateral after default, that party may sell, lease, license or dispose of the collateral so long as everything about the disposition is commercially reasonable

Question 5

A disposition is commercially reasonable as a after of law if the collateral is

Answer 5

1) Sold in the usual manner in a recognized market;

2) Sold at the price current at that market

3) Otherwise in conformity with reasonable commercial practices among dealers in that type of collateral

Question 6

Details of disposition

Answer 6

A disposition sale can either by public or private

A secured party can buy the collateral at a public sale but not a private sale unless the price of the collateral price fixed subject to widely distributed standards price quotes

No specific timetables for the sale but every aspect of the timing must be commercially reasonable under circumstances

Question 7

Notice

Answer 7

Who must be given notice

1) The debtor

2) Secondary obligors

3) Other secured parties;

4) Anyone else from the whom the SP has received an interest in collateral

Question 8

Cannot dispose of a collateral in consumer goods when debtor paid more than

Answer 8

60 percent of its value

Question 9

Redemption rights

Answer 9

A debtor, secondary obligor, or other SP may redeem the collateral by paying the entire secured obligation and expenses including attorneys fees that were incurred in repossession and preparing the collateral for sale

Redemption must occur before the secured party has sold the collateral or accepted in satisfaction form the debt

The debtor cannot waived her right to redemption before the default

Question 10

Default is not defined in Article 9

Answer 10

So look to agreement or contract law

Question 11

After repossession the the collateral the SP has 2 options

Answer 11

1) Can dispose of collateral in a an article 9 disposition sale ; or

2) accept collateral in satisfaction of debt

Question 12

Don’t have to send notice of sale if

Answer 12

Collateral is perishable

Question 13

When Notice must be given ?

Answer 13

Must be Commercially reasonable time (in a non consumer transaction 10 days)