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Repossessions: Section 9-615. Application of Proceeds of Disposition; Liability for Deficiency and Right to Surplus.

(a) [Application of proceeds.] A secured party shall apply or pay over for application the cash proceeds for disposition under Section 9-610 in the following order to:

(1) the reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing, and, to the extent provided for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses incurred by the secured party;

Repossessions: Section 9-617. Rights of Transferee of Collateral.

(a) [Effects of disposition.] A secured party’s disposition of collateral after default:

(1) transfers to a transferee for value all of the debtor’s rights in the collateral;

(2) discharges the security interest under which the disposition is made; and

(3) discharges any subordinate security interest or other subordinate lien [other than liens created under [cite acts or statutes providing for liens, if any, that are not to be discharged]].

Repossessions: Section 9-618. Rights and Duties of Certain Secondary Obligors.

(a) [Rights and duties of secondary obligor.] A secondary obligor acquires the rights and becomes obligated to perform the duties of the secured party after the secondary obligor:

(1) receives an assignment of a secured obligation from the secured party;

(2) receives a transfer of collateral from the secured party and agrees to accept the rights and assume the duties of the secured party; or

Repossessions: Section 9-620. Acceptance of Collateral in Full or Partial Satisfaction of Obligation; Compulsory Disposition of Collateral.

(a) [Conditions to acceptance in satisfaction.] Except as otherwise provided in subsection (g), a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:

(1) the debtor consents to the acceptance under subsection (c);

(2) the secured party does not receive, within the time set forth in subsection (d), a notification of objection to the proposal authenticated by:

Repossessions: Section 9-621. Notification of Proposal to Accept Collateral.

(a) [Persons to which proposal to be sent.] A secured party that desires to accept collateral in full or partial satisfaction of the obligation it secures shall send its proposal to:

(1) any person from which the secured party has received, before the debtor consented to the acceptance, an authenticated notification of a claim of an interest in the collateral;

Repossessions: Section 9-622. Effect of Acceptance of Collateral.

(a) [Effect of acceptance.] A secured party’s acceptance of collateral in full or partial satisfaction of the obligation it secures:

(1) discharges the obligation to the extent consented to by the debtor;

(2) transfers to the secured party all of a debtor’s rights in the collateral;

Repossessions: Section 9-623. Right to Redeem Collateral.

(a) [Persons that may redeem.] A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral.

(b) [Requirements for redemption.] To redeem collateral, a person shall tender:

(1) fulfillment of all obligations secured by the collateral; and

(2) the reasonable expenses and attorney’s fees described in Section 9-615(a)(1).

Repossessions: Section 9-624. Waiver.

(a) [Waiver of disposition notification.] A debtor or secondary obligor may waive the right to notification of disposition of collateral under Section 9-611 only by an agreement to that effect entered into and authenticated after default.

(b) [Waiver of mandatory disposition.] A debtor may waive the right to require disposition of collateral under Section 9-620(e) only by an agreement to that effect entered into and authenticated after default.

Repossessions: Section 9-626. Action in Which Deficiency or Surplus Is in Issue.

(a) [Applicable rules in amount of deficiency or surplus in issue.] In an action arising from a transaction, other than a consumer transaction, in which the amount of a deficiency or surplus is in issue, the following rules apply:

(1) A secured party need not prove compliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance unless the debtor or a secondary obligor places the secured party’s compliance in issue.

Repossessions: Section 9-627. Determination of Whether Conduct was Commercially Reasonable.

(a) [Greater amount obtainable under other circumstances; no preclusion of commercial reasonableness.] The fact that a greater amount could have been obtained by a collection, enforcement, disposition, or acceptance at a different time or in a different method from that selected by the secured party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition, or acceptance was made in a commercially reasonable manner.

Repossessions: Section 9-628. Nonliability and Limitation on Liability of Secured Party; Liability of Secondary Obligor.

(a) [Limitation of liability of secured party for noncompliance with article.] Unless a secured party knows that a person is a debtor or obligor, knows the identity of the person, and knows how to communicate with the person:

(1) the secured party is not liable to the person, or to a secured party or lienholder that has filed a financing statement against the person, for failure to comply with this article; and

Repossessions: Section 9-702. Savings Clause.

(a) [Pre-effective-date transactions or liens.] Except as otherwise provided in this part, this [Act] applies to a transaction or lien within its scope, even if the transaction or lien was entered into or created before this [Act] takes effect.

(b) [Continuing validity.] Except as otherwise provided in subsection (c) and Sections 9-703 through 9-709:

Repossessions: 14.1.1 Scope of This Chapter

This chapter analyzes repossession issues relating to consumer leases of personal property, including automobile leases, rent-to-own (RTO) transactions, solar equipment leases, furniture leases, leases of personal emergency response equipment, and other leases of goods for personal or household use. This chapter does not cover leases of real property, residences, or manufactured home park space. The chapter also does not deal with short term rentals, such as a one-week rental of an automobile or a one-month rental of a power tool.

Repossessions: 14.1.2.1 Generally

This subsection sets out general principles as to when Article 9 governs lease transactions. Application of these principles to automobile leases and RTO transactions is detailed in and , infra. This subsection is background for those discussions and is particularly applicable to the analysis of whether other types of leases are governed by Article 9.

Repossessions: 14.1.2.2 History of UCC Definition of Security Interest

The history of the UCC definition of “security interest” is important because the UCC underwent significant changes in 1987. States adopted the revised definition at various times.4 When reading a case, it is critical to determine whether it interprets the original or the revised definition. Decisions interpreting the original definition will have little precedential value for cases in which the revised definition applies.

Repossessions: 14.1.2.3.1 Introduction

Under the UCC, the facts of each case determine whether a transaction creates a security interest or a lease.10 The focus is on the economics of the transaction.11 When the transaction is designated a lease, courts often place the burden of proof on the party who claims it is not a lease.12 However, the label the parties place upon the transaction is not controlling, and the court will look to the true nature of the transaction to determine w

Repossessions: 14.1.2.3.3 When is additional consideration considered nominal?

One of the circumstances under which the bright-line rule treats a non-terminable lease as a security agreement is when the consumer has the option to acquire the goods at the conclusion of the lease for nominal or no additional consideration.19 Section 1-203(d)(2) states that an option price is not nominal if it is stated as the fair market value of the goods, determined at the time the option is to be performed.20