Article 9 — Secured Transactions · Section 9-335
This section addresses the rights of a secured party to dispose of collateral after a default, including the notice requirements and the effect of the disposition.
Source: U.C.C. § 9-335
A security interest is subordinate to the rights of a person entitled to enforce the interest under the lien. This applies to a protected party who acquires their interest in the collateral and under certain conditions allows the secured party to dispose of collateral upon default.
UCC § 9-335 outlines how a secured party can sell or otherwise dispose of collateral after the debtor defaults on their obligations. It specifies the need for notice to certain parties, and establishes the priority of competing claims to the collateral.
A creditor or lender who holds a secured interest in the collateral.
Property or assets that a debtor offers to secure a loan or credit.
The failure of a debtor to meet the obligations agreed upon in a security agreement.
Example 1
A bank has a security interest in a borrower's machinery. After the borrower defaults on the loan, the bank must notify the borrower and other secured parties before selling the machinery to recover its losses.
Example 2
A leasing company has a lien on a vehicle leased to a business. Upon the business defaulting on payments, the leasing company disposes of the vehicle after fulfilling the notice requirement as specified in UCC § 9-335.