Article 9 — Secured Transactions · Section 9-607
Explore UCC § 9-607, which outlines the rights of secured parties concerning the disposition of collateral upon default.
Source: U.C.C. § 9-607
A secured party may dispose of collateral after default pursuant to a security agreement, recover reasonable expenses incurred in connection with the disposition, and apply the proceeds of the disposition to the obligation secured.
UCC § 9-607 allows a secured party to sell or otherwise dispose of collateral after the debtor defaults on the obligation. The secured party can also recover reasonable expenses they incurred to sell the collateral and use the proceeds to pay off the debt.
A lender or other entity that holds a security interest in a debtor's collateral.
Property that secures a debt or obligation.
The process of selling or otherwise dealing with collateral.
The failure of a debtor to fulfill their contractual obligations.
Example 1
A bank loans a business $100,000 secured by its inventory. Upon default, the bank sells the inventory for $70,000 and deducts any selling expenses before applying the proceeds to the loan balance.
Example 2
A car dealership provides financing for a customer who defaults on their car loan. The dealership repossesses the car, sells it, and uses the proceeds to cover the remaining loan amount and administrative costs.