Secured Transactions

Current market conditions have precipitated borrower defaults under many secured credit facilities, a circumstance that is obliging creditors to revitalize workout and enforcement skills that atrophied in the flush economy prevailing before the crash of 2008. Article 9 of the Uniform Commercial Code provides a suite of remedies in its Part 6.¹ Today, we dust off and survey the fundamental remedies with respect to non-consumer collateral that Part 6 affords to secured parties where the collateral is pledged to secure a debt or other obligation² and enforcement is not stayed under bankruptcy³ or other non-UCC law.

Background

The predicate rules of Part 6 are found in Sections 9-601 and 9-602. Section 9-601 states (inter alia) that, after default, a secured party: has the rights provided (or incorporated by reference) in Part 6 and, except as limited by Section 9-602, those provided by agreement of the parties; may reduce a claim to judgment, foreclose, or otherwise enforce the claim or security interest⁴ by any available judicial procedure; may proceed either as to the documents or as to the goods they cover, if the collateral is documents; and has the rights provided in Section 9-207 regarding collateral in its possession or control under any of Sections 9-104 through 9-107.⁵ These rights are cumulative and may be exercised simultaneously. Conversely, Section 9-601 states that, after default, debtors⁶ generally have the rights provided (or incorporated by reference) in Part 6 and those provided by agreement of the parties. Structurally, therefore, the creditor’s rights are circumscribed by rights expressly granted to the debtor by contract or Part 6 (including by reference) and by duties expressly imposed upon the creditor by contract or Part 6 (including by reference, such as the duties imposed by Section 9-207 regarding collateral in a creditor’s possession or control). Section 9-602, moreover, prohibits the waiver or variance of most of these debtor rights and creditor duties, either pre- or post-default, although Section 9-603(a) generally permits the parties to determine by agreement the standards for measuring the fulfillment of such rights and duties “if the standards are not manifestly unreasonable.”