Part 11- Appendix B: Uniform Commercial Code, Note 30

Summary of Appendix B B-143 to B-146: Acceptance, Redemption, and Effects of Collateral Transactions This section outlines key provisions regarding the treatment of collateral after default, focusing on the rights of secured parties, debtors, and other stakeholders in the context of acceptance of collateral, redemption, and the effects of related transactions. 1. Calculation of Surplus or Deficiency (§ 9–616):   Explanation Requirement: o In consumer-goods transactions, secured parties must provide an explanation of any surplus or deficiency to the debtor or obligor upon disposition of collateral. o An explanation must include:  The surplus/deficiency amount.  A breakdown of how the amount was calculated.  Notification of potential future adjustments.  Contact information for additional inquiries. o Responses must be provided within 14 days of a request or as part of surplus/deficiency communication. Charges: o Debtors are entitled to one free explanation per six-month period. Additional responses may incur a fee up to $25. 2. Effects of Disposition and Transferee Rights (§ 9–617):    Disposition Outcomes: o Transfers all the debtor's rights in the collateral to the transferee. o Discharges the original security interest and any subordinate liens, except for statutory liens not meant to be discharged. Good-Faith Transferees: o A good-faith transferee takes collateral free of claims, even if the secured party fails to comply with UCC provisions. Other Transferees: o Transferees not acting in good faith acquire the collateral subject to:  The debtor’s rights.  Any remaining security interest or subordinate lien. 3. Acceptance of Collateral in Satisfaction (§ 9–620):   Conditions for Acceptance: o Secured parties may accept collateral in full or partial satisfaction of obligations if:  The debtor consents (authenticated record or no objection within 20 days of proposal).  No objections are received from other secured parties or lienholders notified under § 9–621.  The collateral is not consumer goods requiring mandatory disposition under § 9–620(e). o Partial satisfaction is prohibited in consumer transactions. Mandatory Disposition for Consumer Goods: o If 60% or more of the collateral’s cash price or principal amount has been paid:  The secured party must dispose of the collateral within 90 days unless a longer timeframe is agreed upon after default. 4. Notification of Proposal to Accept Collateral (§ 9–621):  Recipients of Proposals: o Secured parties must send proposals for acceptance to:  Subordinate lienholders or secured parties who have filed claims.  Those perfected by filing financing statements or by other means. o Notifications must provide sufficient time for objections to be raised. 5. Effects of Acceptance (§ 9–622):  Consequences for Debtor and Secured Party: o Acceptance of collateral:  Satisfies obligations to the extent agreed upon by the debtor.  Transfers all debtor rights in the collateral to the secured party.  Discharges subordinate security interests and liens.  Ends other subordinate claims, even if procedural errors occur during acceptance. 6. Redemption Rights (§ 9–623):  Who Can Redeem: Debtors, secondary obligors, or other secured parties/lienholders may redeem collateral. Redemption Process: o Requires full payment of secured obligations and related reasonable expenses (e.g., attorney’s fees). Timing: o Redemption must occur before:  Collateral is collected, disposed of, or accepted in satisfaction. o   7. Transfer Statements (§ 9–619):   Definition and Use: o A transfer statement is an authenticated record indicating:  Default by the debtor.  Exercise of post-default remedies.  Transferee acquisition of debtor rights in collateral. o Filing a transfer statement allows for updating public records and obtaining new titles. Limits on Transfers: o Transfers of record or title are not deemed collateral dispositions and do not relieve secured parties of responsibilities. 8. Waivers and Agreements (§ 9–624):   Waiver of Notification: o Debtors and secondary obligors may waive their rights to disposition notifications, but only after default and in an authenticated record. Limitations: o Waivers are subject to timing and statutory conditions to prevent abuse.