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Secured Transactions Overview of Enforcement Prepared by Professor Stephen L. Sepinuck 2015 all rights reserved Overview of Enforcement

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Before beginning to enforce a security interest (i.e., before seeking to repossess or foreclose), the debtor must be in default. Default is a contractual thing; it is defined explicitly or implicitly by the parties agreement, not by Article 9 (although other law might limit it). Overview of Enforcement Default

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Overview of Enforcement Repossession affects only possession or control of the collateral, not the parties rights in it. Typical Chronologies of Repossession What PropertyHowWhen Tangible personal property & HUD realty Creditor replevies or repossesses collateral and then forecloses by selling it Before Foreclosure Some commercial real estate Creditor moves for appointment of receiver during foreclosure action During Foreclosure Most mortgages Creditor or third party buys mortgaged property at foreclosure sale and then gets writ of possession After Foreclosure Repossession Repossession: Foreclosure:

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Overview of Enforcement With judicial process: Repossession Without judicial process: due process without breach of the peace Relevant Factors (1) where the repossession took place; (2) the debtors express or constructive consent; (3) the reactions of third parties; (4) the type of premises entered; and (5) the creditors use of deception

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1. Disposition (e.g., Sale, Lease or License of Collateral) Essentially, a foreclosure sale May be public or private Must be commercially reasonable 2. Acceptance (a/k/a Strict Foreclosure) Taking collateral in full or partial satisfaction of the secured obligation Requires consent after default 3. Collection & Enforcement Applies to obligations owed to the debtor (i.e., accounts, chattel paper, instruments & payment intangibles) Thus, necessarily involved two debts: One owed by the debtor: the secured obligation One owed to the debtor: the collateral Overview of Enforcement Foreclosure: Extracting Value from the Collateral

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1. Disposition (e.g., Sale, Lease or License of Collateral) Notification 9-611 through 9-614 (a) To whom must it be sent? (b) How far in advance? (c) What must it say? (d) What if the SP learns it was not received? Conducting the Disposition? 9-610(b), 9-627 (a) Commercially reasonable: manner, time, place & terms. (b) May SP buy? How Are Disposition Proceeds Distributed? 9-615 (a) Who shares? (b) In what order? Overview of Enforcement Foreclosure: Extracting Value from the Collateral

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1. Disposition (e.g., Sale, Lease or License of Collateral) Post-Disposition Rights & Duties 9-615 through 9-619 (a) What liens survive? (b) What obligations of the debtor and any sureties survive? (c) What post-sale notifications, if any, are required? (d) How is title cleared to certificated property? (e) What warranties does the buyer receive? Liability for Error 9-625, 9-626 Overview of Enforcement Foreclosure: Extracting Value from the Collateral

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2. Acceptance (a/k/a Strict Foreclosure taking collateral) Consent Required 9-620 (a) Whose? (b) How Obtained/Manifested? Post-Acceptance Rights & Duties 9-621 (a) What liens survive? (b) How is title cleared to certificated property? Overview of Enforcement Foreclosure: Extracting Value from the Collateral

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3. Collection & Enforcement Notification 9-404, 9-406 (a) To Whom? Account Debtors Defenses to Payment 9-406 Settlement of Disputes 9-607 How Are Collection Proceeds Distributed? 9-608 Post-Collection Rights & Duties 9-608 (a) What obligations of the debtor and any sureties survive? Overview of Enforcement Foreclosure: Extracting Value from the Collateral