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Repossessions: 9.3.2 Absolute Right Until Disposition

The debtor may redeem the collateral at any time before the secured party disposes of it or enters into a contract for its disposition.45 Many of the states that have non-UCC statutes or non-uniform UCC statutes regarding redemption, however, require that the redemption period be at least a certain number of days.46

Repossessions: 9.3.3 Debtor’s Continued Ownership of the Collateral During the Redemption Period

Because of the right to redeem, the debtor loses ownership of the collateral only when the creditor sells it or completes the UCC’s notice and consent procedures to retain it in satisfaction of the debt.51 The debtor retains ownership even if the creditor has obtained a repossession title in anticipation of the repossession sale,52 and even if the creditor has obtained possession by way of a writ of replevin.53 A repossession title is merely

Repossessions: 9.3.4 Who Can Redeem?

Unlike the former version of Article 9,64 the current version explicitly lists the parties who have the right to redeem the collateral: a debtor, any secondary obligor,65 and any other secured party or lienholder.66

Repossessions: 9.4.3.2.2 Consenting by authenticating an agreement

The first of the two methods by which the debtor may consent to strict foreclosure is by agreeing to the terms of the acceptance in a record signed or otherwise authenticated after default.169 The agreement must include the “terms of acceptance,”170 which must at least include a statement that the creditor is giving up its right to a deficiency.171 The former version of Article 9 did not explicitly authorize agreements for strict foreclosure,

Repossessions: 9.4.3.2.4 Timing requirements and possession of the collateral

The debtor’s consent—whether obtained by agreement or by silence after receipt of a proposal—must occur after default.194 If the collateral is consumer goods, there is an additional requirement: the collateral cannot be in the possession of the debtor when the debtor consents to strict foreclosure.195 The official comments do not explain the rationale behind this restriction, but it is similar to the requirement that the debtor’s consent be obtained only after default in that it prohibits th

Repossessions: 9.4.3.2.5 Should the debtor object?

Debtors should object to strict foreclosure if they believe that the collateral can be sold for more than the sum of the amount remaining on the obligation and the creditor’s expenses of repossessing, reconditioning, and selling the collateral. In other words, debtors should object if a surplus would result. If the debtor fails to object, the debtor loses the right to receive the surplus from the sale of the collateral.197 Debtors should also object if they want to reinstate the obligation or redeem the collateral.

Repossessions: 9.3.6.4 Multiple Debts; Multiple Items of Collateral

When the collateral is security for more than one obligation, the debtor may have to tender the amount due on all obligations in default in order to redeem the item.117 This commonly occurs when collateral is purchased under a security agreement covering future advances and the debtor is also in default on the future advance.118 Some state laws allow the debtor to redeem individual items, however.119

Repossessions: 9.3.7 Tender

Section 9-623(b) requires that the consumer “tender” the redemption amount. The mechanics of tendering the redemption amount under the UCC may be controlled by common law tender requirements.120 Under the common law, a mere offer to pay is not enough.

Repossessions: 9.4.5 Partial Strict Foreclosure

Revised Article 9 departs from the previous version by allowing creditors to accept collateral in partial satisfaction of the debt. Under this procedure, termed partial strict foreclosure, the creditor can retake and keep the collateral but treat it as only a partial credit toward the debt, leaving a deficiency still owing. Just as is true when the creditor sells the collateral to an alter ego, partial strict foreclosure raises the prospect of self-dealing to the detriment of the debtor.

Repossessions: 9.4.1 Deficiency Precluded

Except when the debtor has already paid off a substantial portion of the loan139 or when prohibited by state law,140 the creditor may propose to retain repossessed collateral in satisfaction of the obligation.

Repossessions: 9.5 Judicial Sale of Collateral

Although not frequently encountered in consumer transactions, there are circumstances in which repossessed goods may be disposed of by judicial sale. For example, a creditor may go to court to seek a declaration of default or to obtain possession of collateral, and then a judicial sale of the collateral.236

Repossessions: 9.6.1 Introduction

Prior to or immediately after repossession, it will often be to the advantage of the debtor to arrange a buyer for the collateral. A private buyer is likely to pay more than can be obtained through an auction or other wholesale disposition, the option a creditor is most likely to use.

Repossessions: 9.6.2 Creditor’s Involvement in Debtor’s Sale May Subject the Sale to Article 9 Requirements

A creditor who, without a repossession, requires a defaulting debtor to work with it to sell the collateral is deemed to have disposed of the collateral itself.245 This conclusion is consistent with UCC § 9-610(a), which says that a secured party may sell or otherwise dispose of collateral “after default,” without specifying that the creditor must first take possession of the property.

Repossessions: D.1 Sample Answer and Counterclaims to Deficiency Action

CAR CREDITOR, INC. a corporation,

Plaintiff

v.

JANE CONSUMER,

Defendant

ANSWER AND COUNTERCLAIMS

1. The Defendant [admits] [lacks sufficient information or knowledge to be able to answer and therefore denies] the allegations contained in paragraph [1] of the Complaint that Plaintiff (hereafter called “Creditor”) is a corporation organized under the laws of [state], with offices for doing business in [name] County, [state].

Repossessions: D.5 Sample Class Action Complaint Alleging Churning

Consumer, an individual, on

behalf of herself and all others similarly

situated,

Plaintiff

v.

Buy Here Pay Here Dealer, Inc.,

Defendant

Civil Action No.

COMPLAINT FOR DAMAGES AND INCIDENTAL RELIEF16

Plaintiff Consumer, an individual, on behalf of herself and all others similarly situated, sues Defendant, Buy Here Pay Here, Inc., a [state] corporation, and alleges:

Introduction

Repossessions: D.6.2 Brief in Support of Emergency Motion for Return of Property

BRIEF IN SUPPORT OF EMERGENCY MOTION FOR RETURN OF PROPERTY

Introduction

This is an action involving a wrongful conversion of a family minivan by use of intimidation and threats of violence, supported by threats of arrest by armed law enforcement. Plaintiffs had paid for their minivan in full, without financing, and at no point was there any lien on the minivan that would allow for an ex parte taking. Plaintiffs own the minivan outright.

Repossessions: D.7 Sample Complaint to Enjoin Sale

Consumer,

Plaintiff

v.

Secured Creditor,

Defendant

Case No.

COMPLAINT TO ENJOIN RESALE OF REPOSSESSED VEHICLE

Parties

1. The Plaintiff [name] is an individual who resides at [address].

2. The Defendant [name] is a corporation that does business in this state and is a secured party as defined by [state codification of U.C.C. § 9-102(a)(72)].

Facts