The Burden of Commercial Reasonableness Following a Default
Article 9 of the Uniform Commercial Code (UCC) governs secured transactions, and Part 6 of this article governs the rights and duties of the parties in the event of default. In the event of default by a debtor, a secured party may repossess the collateral and dispose of it through a sale, lease, license, or other form of disposition.
June 29, 2023 at 11:29 AM
7 minute read
BankruptcyThe original version of this story was published on The Legal Intelligencer
A secured lender knows (or should know) that when it disposes of collateral following an event of default it must do so in a commercially reasonable manner. But, what does that mean in practice and what is the secured lender's burden if its disposition is challenged by the defaulting debtor in an action to recover a deficiency? Article 9 of the Uniform Commercial Code (UCC) governs secured transactions, and Part 6 of this article governs the rights and duties of the parties in the event of default. In the event of default by a debtor, a secured party may repossess the collateral and dispose of it through a sale, lease, license, or other form of disposition. See U.C.C. Section 9-610(a) (Am. L. Inst. & Unif. L. Comm'n 2022).
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