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148 Cards in this Set
- Front
- Back
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What is a secured transaction?
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a relationship between two parties, typically a creditor and a debtor, in which the debtor has given certain assurances in the form of a security interest in specific property (collateral) to assure the obligation will be performed.
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What is a security interest?
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an interest in personal property or fixtures that secures payment or performance of an obligation.
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What is a security agreement?
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a consensual agreement that creates a security interest.
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What law governs secured transactions?
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UCC Article 9, the security agreement
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Is a security agreement required for the UCC to apply to a transaction?
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not necessarily if the substance of the transaction is a secured transaction, but typically a security agreement is involved.
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Who is a debtor?
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a person who has an interest, other than a security interest or other lien, in the collateral, such as the sole owner of the collateral.
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Who is an obligor?
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a person who must pay with respect to the obligation that is secured by a security interest in the collateral.
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What is collateral?
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Property subject to a security interest.
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What are the two broad categories of collateral?
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1. tangible and
2. intangible. |
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Why is classifying collateral necessary?
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classification of property can affect
1. the validity of the security interest, 2. the way in which a security interest is perfected, and 3. the rights of a third party in the collateral, such as a buyer of collateral. |
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How is collateral classified?
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Classification is based on the DEBTOR's principal use at the time when the security interest attaches.
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What are the two types of tangible collateral?
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1. Goods
2. Software (when embedded, considered part of the good it is embedded in) |
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What is the definition of "goods" as tangible collateral?
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anything that is movable at the time that a security interest attaches including
1. fixtures 2. standing timber that is to be cut 3. unborn animals 4. growing or unharvested crops 5. manufactured homes |
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What are the 4 classifications for "goods" as tangible collateral?
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Cats Get Furry Paws Into Everything
1. Consumer Goods 2. Farm Products 3. Inventory 4. Equipment |
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What are consumer goods?
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those goods acquired for personal, family, or household purposes
ex. TV, clothes, refrigerator |
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What are farm products?
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goods that are crops or livestock and include supplies that are used or produced in farming.
ex. eggs that chickens lay, hay for horses |
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What is inventory?
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goods, other than farm products, that are held for sale or lease, are furnished under a service contract, or consist of raw materials, works in process, or materials used or consumed in a business.
ex. furniture at a furniture store, apples at the grocery store |
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What is equipment?
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catch-all
goods that are not consumer goods, farm products, or inventory. ex. delivery trucks, office computers not for sale. |
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When is software considered a tangible good?
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When it is embedded in another tangible good, it is treated as part of the good it is embedded in.
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What constitutes intangible collateral?
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includes 9 classes of personal property divided into 2 sub-groups, quasi-intangible property and true intangible property.
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How is intangible collateral classified?
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classification DOES NOT turn on the manner in which the debtor uses the good.
two groups- quasi-intangible and true intangible |
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What is quasi-intangible property?
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Goods tangible enough to be possessed, but do not constitute a good. Usually defined by a writing.
1. Documents 2. Instruments 3. Investment Property 4. Chattel Paper |
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What quasi-intangible collateral is included under documents?
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A document of title which confers on the holder ownership in goods.
ex. warehouse bill of lading |
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What quasi-intangible collateral is included under instruments?
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negotiable instruments, such as promissory notes and checks, and non-negotiable instruments that evidence a right to the payment of a monetary obligation and are transferred in the ordinary course of business by delivery, such as a certificate of deposit from a bank.
ex. IOU |
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What quasi-intangible collateral is included under investment property?
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includes both certificated and uncertificated securities, such as stock and bonds
ex. stock certificates |
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What quasi-intangible collateral is included under chattel paper?
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consists of one or more records that evidence both
1. a monetary obligation and 2. a security interest in specific goods or a lease in specific goods ex. a security agreement that also shows the amount due |
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What is true intangible collateral?
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property with not tangible form that can be possessed
1. accounts (i,e, accounts receivable, not checking accounts) 2. deposit accounts (checking accounts) 3. commercial tort claims 4. general intangibles |
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What true intangible collateral is included under "accounts"?
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the right to payment of a monetary obligation for goods or services
i.e. accounts receivable. |
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What true intangible collateral is included under "deposit accounts"?
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includes savings, passbook, time, or demand accounts
i.e. a checking account |
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What true intangible collateral is included under "commercial tort claims"?
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tort claims possessed by an organization, or by an individual that arose in the course of the individual's business.
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What true intangible collateral is included under "general intangibles"?
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residual category of personal property that is not included in other types of collateral
i.e. trademarks and copyrights |
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What types of transactions does Article 9 govern?
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A transaction that creates, by contract, a security interest in personal property or a fixture.
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Does Article 9 apply to leases?
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A true lease is actually governed by Article 2A of the UCC.
However, some leases are actually disguised sales. These leases fall under Article 9. |
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When is a lease a disguised sale?
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Prerequisite:
lessee must pay consideration to the lessor and this payment obligation CANNOT be terminated by the lessee PLUS one of the following (any) 1. the original term of the lease is equal to or greater than the remaining economic life of the goods; 2. the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods 3. The lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal consideration upon completion of the lease 4. the lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon completion of the lease. |
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When is a consignment a secured transaction under Article 9?
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All of the following must be present:
1. a person (consignor) must deliver goods to a merchant, who deals in goods of that kind, for the merchant to sell 2. the value of the goods delivered must be at least $1,000 AND 3. the goods must NOT be consumer goods immediately before the delivery. |
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What are the two basic types of liens?
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1. Statutory Liens in services and materials (mechanic's liens)
2. Agricultural liens |
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Are statutory liens for services and materials subject to Article 9?
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No.
EXCEPTION: Priority provision |
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What are agricultural liens?
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They include interests in farm products that secures payment for either
1. goods and services furnished with respect to the debtor's farming operation (i.e. livestock feed sold to cattle rancher) OR 2. rent on real property leased by a debtor in connection with a farming operation. |
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Are agricultural liens subject to Article 9?
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Yes.
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The sale of what types of receivables is governed by Article 9?
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Charlie Parker's Prolific Notes Are Played Intensley
CP= Chattel paper PN=promissory notes A=accounts PI=payment intangibles *buyer is considered to be the secured party, the sellor is the debtor |
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The sale of what types of receivables is not governed by Article 9?
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Sale of business, large commercial transactions
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Are real property transactions subject to Article 9?
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Generally no.
However, article 9 may govern a receivable if it is secured by real property. ex.: B lends P $300,000 to buy a house secured by a mortgage. B then gets a loan from S for $100,000 and signs a promissory note for that amount and secures the note with the mortgage from P. Article 9 does not apply to mortgage between B and P. Article 9 DOES apply to promissory note transaction between S and B. |
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What is attachment?
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a security interest that is enforceable against the debtor with respect to the collateral is said to have "attached"
ripening of the enforcement rights of the security interest |
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What conditions must be satisfied for attachment of the security interest?
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1. VALUE has been given
2. Debtor has RIGHTS in the collateral AND 3. Debtor has authenticated a security agreement with a description of the collateral OR the secured party has possession or control of the collateral pursuant to a security agreement. |
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What value must be given in order for a security interest to attach?
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same consideration as contract law requires BUT need not be NEW value
later securing a previous loan with valuable collateral=ok! |
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Which debtor rights does the security interest attach to?
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Only those rights that the debtor has in the collateral- nothing more.
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What is required for an enforceable security agreement in order for a security interest to attach?
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Restful Days Ahead
R: Record must be in a tangible medium or readily accessible electronic form D: description of collateral Must reasonably describe the collateral, but cannot be super-generic 1. describing collateral by class=ok EXCEPT consumer goods A: Authentication by debtor Normally a signature, but signature is construed broadly to include almost any moniker |
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Can a security interest attach absent a written security agreement?
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Yes, but only if:
1. the creditor takes POSSESSION or CONTROL of the collateral 2. the possession or control is PURSUANT to a security agreement (can be oral, but must be a valid agreement) |
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Does a secured party that takes possession or control of attached collateral owe any duties to the debtor?
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Yes
1. general duty of reasonable care with respect to the collateral 2. duty to keep the collateral identifiable 3. duty to relinquish the collateral when the obligation is satisfied. |
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What is a PMSI and why is it important?
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Purchase Money Secured Interest
PMSIs have special and beneficial priority rules. |
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To what types of collateral may a PMSI attach?
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Only consumer goods and software.
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How does a PMSI arise?
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Security interest must ATTACH, then there are 2 situations where a PMSI arises:
1. Lender's PMSI 2. Seller's PMSI |
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How is a lender's PMSI formed?
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First- attachment, then
a secured party that gives value to the debtor to enable the debtor to acquire rights in or use of the goods, and the value given IS SO USED. ex.- loan to buy a piano, and debtor buys the piano while lender retain security interest= PMSI. debtor doesn't buy a piano- NO PMSI |
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How is a seller's PMSI formed?
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First attachment, then
a secured party sold goods to the debtor, and the debtor incurs an obligation to pay the security party all or part of the purchase price. ex. seller sells piano for credit pursuant to security agreement in which seller retains a piano. |
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Can a PMSI be created by consignment?
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Yes- a consignment yields a PMSI in INVENTORY.
ex. agreement that Rug seller must only pay for rugs sold and must return the other rugs not sold. supplied has PMSI in rugs as inventory. |
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How is a PMSI created for software?
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Must be part of an INTEGRATED TRANSACTION in which the debtor also acquired an interest in an associated good for the principal purpose of using the software in the good (COMPUTER with Microsoft word=PMSI)
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What is a dual status PMSI?
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PMSIs can also be partially non-PMSIs at the same time= dual status.
Only applies to non-consumer goods. Often applies when goods are |
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Does collateral lose PMSI status if it also secures another obligation?
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No. dual status PMSI.
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Does collateral lose its PMSI status if the underlying obligation is also secured by other non-PMSI collateral?
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No. dual status PMSI.
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Does collateral lose its PMSI status if the obligation is renewed, refinanced, or restructure?
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No- dual status PMSI.
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What is accession of goods and why does it matter?
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Refers to goods that are physically united with other goods in such a manner that the identity of the goods IS NOT LOST.
Important to determine collateral identity if it is combined with other property. |
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What is co-mingling of goods and why does it matter?
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Refers to goods that are physically united with other goods in such a manner that their identity IS LOST in a product or mass.
Important to determine collateral identity if it is combined with other property. |
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When goods are co-mingled, what happens to the security interest?
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It extends to the combined property or mass.
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Does a security interest attach to property acquired after making the security agreement?
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No- it applies only to the collateral described in the security agreement
BUT- if the security agreement contains an after-acquire property clause, it will apply! |
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What are proceeds?
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Whatever is
1. acquired upon the lease, sale, license, exchange, or other disposition of collateral 2. whatever is collected on or distributed from the collateral 3. rights arising out of the collateral 4. legal claims arising out of the collateral 5. insurance claims arising out of the collateral |
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Does a security interest attach to proceeds from collateral?
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Yes. no special clause necessary unlike after-acquired property.
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What is perfection?
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gives the secured party superior rights in the collateral in comparison to an unperfected secured party and possibly priority over other secured parties.
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What is the difference between perfection and attachment?
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Attachment=the process in which a security interest becomes enforceable against the debtor with respect to the collateral.
Perfection= awards SUPERIOR LEGAL RIGHTS. Attachment is NECESSARY for perfection. |
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What is required for perfection?
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One of the following
Fuzzy People Cry Aloud 1. Filing of a financing statement 2. possession of the collateral 3. control over the collateral 4. automatic perfection (either temporary or permanent) |
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If perfection by filing sufficient for all types of collateral?
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No. invalid for
1. Deposit Account 2. money 3. letters of credit |
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What's a financing statement?
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The document that must be filed in order to perfect by filing.
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What basic information must the filing statement include?
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1. debtor's name
2. secured party's name 3. a description of the collateral For real property related collateral (fixtures, oil, timber to be cut), the statement MUST INCLUDE 1. An indication that it covers a given type of collateral 2. an indication that it is to be filed with real property records 3. a description of the underlying real property 4. the name of a record owner of the real property if different from the debtor. |
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What is the overall purpose of the financing statement?
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To put potential creditors on notice of the security interest.
(notice filing) |
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What are the rules for the debtor's name if the debtor is an individual?
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Must be the debtor's correct legal name and cannot be SERIOUSLY MISLEADING.
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What safe harbors may apply to the debtor's name?
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General: If the debtor's name is incorrect on the financing statement, the statement is VALID IF a search for the correct legal name would uncover the misleading financial statement.
Texas If the filer relies on an individual's name as it appears, fraudulently or otherwise, on a valid state ID, the financing statement is valid. |
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What if an individual changes their legal name after filing of the financing statement?
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if the financing statement becomes seriously misleading due to debtor's name change, the secured party has 4 MONTHS to file an amendment.
FAILURE to amend prevents secured party from acquiring interest in future acquired property after the four month period. |
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What are the rules for the debtor's name if the debtor is a corporation?
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for registered organiations, the debtor's name that should appear on the financing statement is the one that appears in a document used for public registration (articles of incorporation).
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What are the rules regarding trade names?
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filing ONLY under the corporation's trade name is INSUFFICIENT to provide notice in a financing statement, BUT a financing statement OMITTING a trade name is NOT INVALID.
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What happens if the financing statement contains an erroneous secured party name?
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More lee-way- but could result i estoppel of the secured party from perfecting the interest.
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What type of collateral description must be included on the financing statement?
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A super-generic description is VALID!
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Does a financing statement cover after-acquired property or proceeds?
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If the description is broad enough to cover it- Yes. (generally yes)
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Must a financing statement be specially authorized?
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the debtor must authorize the filing, but an authenticated security agreement AUTOMATICALLY authorizes the filing.
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Where should a financing statement be filed?
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with the secretary of state in which the DEBTOR is located-
EXCEPTION- real property- filed int eh county where the collateral is located. |
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What additional information should be included but won't result in invalidity of a financing statement?
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1. an address for both the detor and the secured party
2. identification of whether the debtor is an orgnization or not 3. for orgs, the type, jurisdiction, and org. ID number. Failure to include doesn't result in invalidity IF ACCEPTED. |
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What happens if the filing office rejects a filing statement?
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1. justified rejection= the statement was never filed
2. unjustified rejection= treated as having been filed except with respect to a purchaser of the collateral who gives value in REASONABLE RELIANCE upon an absence of the record (includes subsequent secured parties) |
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What happens if the filing office makes an error in filing the financing statement?
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No effect on validity.
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How long does a financing statement last?
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5 years from filing date.
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Can a financing statement be continued?
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Must file a continuation statement within 6 months from expiration of the statement- NOT BEFORE, and NOT AFTER 6 months prior to date of expiration.
No debtor authorization necessary. |
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Can a financing statement be terminated before the expiration date?
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Yes. Termination statement filed.
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For what types of collateral can a security interest be perfected by possession?
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Good Investors Never Dare Tip Chatty People
Goods Instruments Negotiable Documents Chattel Paper (tangible) POSSESSION IS THE ONLY WAY TO PERFECT AN SI in MONEY |
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For what types of collateral can a security interest be perfected by control?
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DAs In Philadelphia Encounter Danger Establishing Criminal Procedure, Lots Of Cases
Deposit Accounts Investment Properties Electronic Documents Electronic Chattel Paper Letter of Credit CONTROL IS THE ONLY METHOD OF PERFECTION FOR: 1. Letter of Credit Rights 2. Deposit Accounts (checking accounts) |
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How does a secured party establish control over a deposit account?
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One of three methods:
1. secured party is the bank maintaining the account 2. debtor, secured party, and bank have authenticated a record agreeing that the secured party has control 3. secured party's name is added to the debtor's account |
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What is automatic perfection?
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perfection that occurs as a result of attachment without the need for filing, possession, or control
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What are the two different types of automatic perfection?
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1. Indefinite
2. Temporary |
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When does indefinite automatic perfection occur?
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Attachment of a PMSI in consumer goods ONLY.
A PMSI in inventory or equipment (including automobiles) is NOT automatically perfected |
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When does indefinite temporary automatic perfection occur?
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3 ways
1. when a secured party perfects by possession and subsequently gives the collateral over to the debtor for resale (DELIVERY of COLLATERAL TO DEBTOR) 2. either the debtor or collateral moves from one state to another 3. collateral is exchanged for or gives rise to proceeds |
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How long does a security interest remain perfected when a secured party makes property available to the debtor for the purpose of selling or exchanging the collateral? (delivery of collateral to debtor)
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20 days
Must file a financing statement in order to perfect for longer period |
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How long does a security interest remain perfected when a debtor moves from one state to another?
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4 months.
Must re-file in the new state within the 4 month window to extend perfection. |
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How long does a security interest remain perfected when collateral is transferred to a person in another state who becomes a debtor?
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1 year after the transfer.
Must re-file in new state within the 1 year period to extend perfection. |
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If either the debtor or the collateral moves from one state to another and the secured party allows the temporary perfection period to expire without re-filing in the new state, what happens with respect to a purchaser for value of the collateral?
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The collateral is treated as if the security interest was never perfected.
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Can proceeds be automatically perfected?
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Yes. Both indefinitely and temporarily.
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When is a security interest in proceeds automatically temporarily perfected and for how long?
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If a security interest in collateral is perfected, a security interest in PROCEEDS from that collateral is automatically perfected for 20 days from the time the security interest in the proceeds attaches.
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When is a security interest in proceeds automatically indefinitely perfected?
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2 situations allow perfection indefinitely after 20 days:
1. identifiable CASH PROCEEDS + perfection of security interest in original collateral 2. SAME OFFICE RULE 3 requirements (1) a filed financing statement covers original collateral (2) the proceeds are collateral in which a security interest may be perfected by filing in the same office in which the original financing statement has been filed AND (3) the proceeds are not acquired with cash proceeds |
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What is the same office rule and what does it do?
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Allows a perfected security interest in poceeds to continue indefinitely if 3 criteria are met:
1. a filed financing statement covers original collateral 2. the proceeds are collateral in which a security interest may be perfected by filing in the same office in which the original financing statement has been filed AND 3. the proceeds are not acquired with cash proceeds Office refers to office of FILING! |
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What are the two nuances of the same office rule?
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1. a broad enough description of collateral in the financing statement eliminates the need to utilize the rule
2. If property is subject to a special statute in lieu of Article 9 (Certificate of Title for automobiles) the STATUTE CONTROLS |
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What are the 3 major types of creditors subject to prioritization?
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1. General Creditors (unsecured)
2. Judicial Lien Creditor 3. Secured Creditor |
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What is a general creditor?
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One who has a claim, including a judgment, but who has no lien or security interest with respect to the property in question.
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What is a judicial lien creditor?
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a creditor who acquires a lien via judicial process, not operation of law.
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What is a secured creditor?
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3 types of secured creditors
1. perfected 2. unperfected 3. perfected PMSI |
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unperfected secured creditor v. general creditor.
Who prevails? |
Secured creditor always prevails.
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unperfected secured creditor v. judicial lien creditor
Who prevails? |
judicial lien creditor always prevails
HOWEVER if lien is acquired AFTER ATTACHMENT of unperfected interest, the lien creditor MUST NOT HAVE KNOWLEDGE of the interest when the lien attaches. |
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perfected secured creditor v. judicial lien
who prevails? |
judicial lien is SUBORDINATE to perfected secured interest
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PMSI v. judicial lien.
Who prevails? |
PMSI prevails.
A PMSI that perfects before or within 20 days after debtor receives possession reverts back to the date the debtor took possession. |
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What is an advance?
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an amount of money lent after the security agreement attaches.
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When do advances have priority?
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Advances made by a party with a secured interest within 45 days of a lien creditor becoming such will have priority over the creditor.
Advances made more than 45 days after the lien creditor becomes such are subordinate to the lien creditor UNLESS: 1. the advance is made without knowledge of the lien 2. the advance s made pursuant to a commitment entered into without knowledge of the lien. thus- secured party can advance money for 45 days regardless of knowledge. |
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What is the general rule when two secured creditors claim collateral?
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First to file or perfect wins.
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secured perfected creditor v. secured unperfected creditor.
Who prevails? |
perfected interest prevails regardless of the date the security agreement was signed or the interest attached.
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secured unperfected creditor v. secured unperfected creditor.
Who prevails? |
First in time, first in right rule applies
CRITICAL TIME is ATTACHMENT |
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secured perfected creditor v. secured perfected creditor.
Who prevails? |
the First to FILE or PERFECT, whichever came first, has priority.
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What are the 4 types of PMSIs and how is each perfected?
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1. PMSI in consumer goods (perfection is automatic)
2. PMSI in equipment and (3) fixtures (perfection requires filing within 20 days of either the debtor receiving the goods or the goods becoming fixtures) 4. PMSI in Inventory (perfection requires a filing prior to the debtor receiving possession of the inventory and the secured party must notify all conflicting security interest holders of the PMSI prior to the debtor receiving possession |
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PMSI v. all other security interests
Who prevails? |
Generally, PMSI has priority over all other security interests
Some excpetions. See later slides |
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PMSI v. PMSI
Who prevails? |
First to file rule applies
EXCEPTION: SELLER PMSI prevails over LENDER PMSI |
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PMSI in fixtures v. other interests in associated real property.
Who prevails? |
PMSI in fixtures has priority over the real property IF
1. debtor has an interest of record in the real property (owner) or is in possession of the property (lease) 2. the security interest is perfected by fixture filing before the goods become fixtures or within 20 days after. EXCEPTION: Construction Mortgage takes priority IF 1. construction mortgage is recorded before goods become fixtures AND 2. only covers goods that become fixtures before the completion of the construction |
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What interests does a PMSI in consumer goods have priority over and how is it perfected?
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Perfection=automatically
Priority=everything but Buyers in Ordinary Course of Business and consumer-consumer transactions |
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What interests does a PMSI in non-consumer, non-inventory, non-fixture goods have priority over and how is it perfected?
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Perfection=filing within 20 days of debtor receiving collateral
Priority= everything but Buyer in Ordinary Course of Business |
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What interests does a PMSI in fixtures have priority over and how is it perfected?
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Perfection=filing a fixture filing prior to or within 20 days of goods becoming fixtures
Priority= Everything but a construction mortgage |
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What interests does a PMSI in inventory have priority over and how is it perfected?
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Perfection= Filing prior to debtor receiving possession AND sending proper NOTICE to conflicting security interests
Priority= Everything but a Buyer in Ordinary Course of Business |
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Buyer v. secured unperfected creditor.
Who prevails? |
Buyer prevails and takes free of any unperfected security interest IF
1. the buyer gives value 2. the buyer receives delivery of the collateral 3. the buyer buys without knowledge of the preexisting security interest |
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Buyer in ordinary course of business v. secured perfected creditor.
Who prevails? |
A Buyer in the Ordinary Course of Business takes free of a security interest even if it is perfected and the buyer knows it exists IF
1. the buyer buys goods 2. from a merchant who is in the business of selling goods of that kind 3. in good faith without actual knowledge that the sale violates the rights of another Look to the SELLER to determine if the buyer is a BIOCB |
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Consumer buyer v. perfected secured creditor.
Who prevails? |
Garage Sale Rule
a buyer of consumer goods takes free of any security interest, even if perfected, unless prior to the purchase the secured party has FILED A FINANCING STATEMENT AND 1. the consumer buys goods for value 2. for his own personal, family or household use, 3. from a consumer seller 4. without knowledge of the security interest (at a garage sale) PMSI in consumer goods with automatic perfectoin DOES NOT PROTECT from garage sale rule |
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What is the definition of default under Article 9?
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there is no definition. The parties define default. In the absence of an agreed definition, non-payment is generally considered default.
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Upon default, what are the creditors options?
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1. secure a judgment
2. re-possession/render equipment unusable [3. for accounts, collect debts owed to the debtor] |
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What are the rules regarding re-possession?
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1. no breach of the peace
criminal act=breach of the peace unauthorized police involvement=breach of the peace |
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Once a secured party re-possesses collateral, what can they do with it?
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sell, lease, license or otherwise dispose of any and all collateral either publicly or privately so long as the disposition is in all ways COMMERCIALLY REASONABLE.
Requires 1. commercially reasonable price 2. commercially reasonable time 3. with notice |
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How is "commercially reasonable" disposition defined?
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1. collateral sold in the usual manner on a recognized market
2. at a price current in any recognized market of the disposition 3. otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject of the disposition |
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What is a commercially reasonable price?
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Fair market value
Low prices trigger scrutiny- trying to avoid paying prior interests |
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when is a commercially reasonable time?
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surrounding circumstances dictate- no definition in Article 9
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What notice is required for the disposition of collateral?
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Notice of disposition must be given to:
1. the debtor 2. any secondary obligor 3. any other secured party or lienholder that was perfected by filing of pursuant to a statute. |
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When is the disposition notice timely?
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Reasonable time.
Safe harbor- 10 days prior to disposition is reasonable |
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What must the notice contain?
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names of debtor and secured party
description of collateral terms of disposition statement informing debtor of his entitlement to proceeds |
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In what order are proceeds from the disposition of collateral distributed?
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1. reasonable expenses
2. secured party 3. subordinate liens 4. debtor |
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What is the proceeds don't satisfy the debt?
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creditor can obtain a deficiency judgment against debtor for shortcoming
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Can a creditor accept the goods rather than disposing of them?
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yes.
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What are the two types of acceptance?
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1. full satisfaction
2. partial satisfaction |
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What is full satisfaction and how is it done?
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creditor accepts the goods in full satisfaction of the underlying debt.
requires 1. debtor consents after default to the acceptance in an AUTHENTICATED RECORD 2. the debtor does not object to the secured party's proposal within 20 days |
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What is partial satisfaction and how is it done?
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secured party accepts goods to satisfy part of the underlying debt. requires consent and authenticated record.
CANNOT BE DONE FOR CONSUMER DEBTORS- must be full satisfaction UNLESS goods are consumer goods and the debtor has paid 60 percent of the obligation |
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What is redemption?
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prior to disposal, the debtor can redeem his collateral by paying obligation in full and providing reasonable expenses to creditor.
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What happens if a secured party fails to comply with the provisions in Article 9 (i.e. breaches the peace during re-possession)?
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1. DAMAGES may be due to debtor
2. debtor may recover value + 10% of value 3. rebuttable presumption that secured party is NOT entitled to deficiency 4. deficiency judgment may be reduced 5. conversion action may be appropriate. |
