DEFAULT
Events causing default
- The making of any false or misleading statements
- The collateral being lost, stolen, damaged, or destroyed
- The failure of the debtor to keep the collateral insured and in good repair
- A grant by the debtor of a security interest in the same collateral to any other party
- Any levy upon or seizure of the collateral
- Failure of the debtor to notify the secured party of any change of name, change in location of the debtor, and so on
- A disposition of any or all of the collateral in a manner not authorized
- Failure of the debtor to properly inform the secured party or account for any proceeds of an authorized disposition of the collateral s it has agreed to
- Death, dissolution, termination of existence, reorganization, insolvency, or business failure of the debtors
DEFAULT
General Insecurity Clause meaning
Provides for default if there is a circumstance that impairs the value of the collateral or imperils the prospect of repayment
DEFAULT
Acceleration Clause meaning
Provides that in some or all instances of default, the entire amount owed to the secured party becomes due immediately.
DEFAULT
When may a secured party invoke an acceleration clause?
- Only if that party in good faith believes the prospect of payment or performance is impaired.
- The burden of establishing lack of good faith is on the party against which the power has been exercised.
DEFAULT
What judicial remedies are available to a secured party after default?
A secured party:
- May reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure; and
- If the collateral is documents, may proceed either as to the documents or as to the goods they cover.
REPOSSESSION
What non-judicial remedies may a secured party exercise after default?
After default, a secured party:
- May take possession of the collateral; and
- Without removal, may render equipment unusable and dispose of collateral on a debtor’s premises.
REPOSSESSION
What limitation is put on repossession by secured party?
The secured party may only proceed without breach of the peace (by either party).
REPOSSESSION
What is the statutory definition of “breach of the peace?”
Trick question—there is none.
It is done on a state-by-state basis because the UCC does not define it.
REPOSSESSION
Things that probably breach the peace
- Physical violence, or threats of physical violence, by either debtor or secured party
- “Noisy protests” by debtor or family member
- Entry into enclosed area like garage or home
- Breaking locks for entry
REPOSSESSION
Things that probably don’t breach the peace
- Peaceable persuasion of debtor to turn collateral over
- Taking from open garage without incident
- Taking from street or parking lot or driveway without incident
- Using some amount of trickery or sneakiness
