Default

Question 1

Default

Answer 1

Generally the failure of the debtor to make timely payments

Question 2

Rights of Secured Party After Default

Answer 2

May:

1. Seek possession of collateral and in order to satisfy obligor’s outstanding obligation may: (1) sell the collateral or (2) retain it in full or partial satisfaction of debt
2. Initiate judicial proceedings to obtain a judgment; or
3. Pursue any course of action to which the parties have agreed

Question 3

Repossession of Goods

Answer 3

• SP can take goods after default with or without judicial process but can’t breach the peace
• Misrepresentation ok to gain entry or possession BUT the debtor must give permission to come in home or something attached to the home
• Non-consumer goods: SP can make the goods useless

Question 4

Default Proceedings for Fixtures

Answer 4

After default:

• SP may proceed as to the fixtures in accord with the rights and remedies with respect to real property
• When a SP’s security interest has priority over encumbrancers of real property, the SP can remove the fixture from the property BUT the SP is liable for the cost of repairing any physical object damaged by removal to encumbrancers who aren’t the debtor

Question 5

Disposition of Collateral after Repo

Answer 5

• SP can sell collateral in commercially reasonable way
• Must send notification after default and at least 10 days before earliest sale
• For consumer transactions - must send notification a reasonable time before the sale

Question 6

Commercially Reasonable

Answer 6

In conformity with reasonable commercial practices among dealers of kind in that collateral

Question 7

Who gets money after the default sale of collateral?

Answer 7

In this order:

1. Reasonable expenses of retaking, holding, disposing, processing, prepping for disposition or attorney’s fees
2. Satisfying obligations secured by SI
3. Satisfying obligations secured by subordinate SI
4. Debtor (if anything left)

Question 8

Strict Foreclosure

Answer 8

May accept collateral in partial or full satisfaction of obligation (must have debtor’s consent and no notice of objection)

For a consumer transaction, the SP may not accept collateral in partial satisfaction of an obligation

Question 9

Failure to be Commercially Reasonable

Answer 9

• SP can’t get deficiency judgment
• Might be subject to actual damages suffered by the debtor
• May be sued for conversion
• Debtor may be entitled to injunctive relief