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Bankruptcy Lanigan & Lanigan, P.L.
831 W. Morse Blvd., Winter Park, Florida 32789


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mortgage workouts

Disposing of Collateral in a Foreclosure

A foreclosure sale is a way for a secured party to turn the collateral into the monetary equivalent of the debtor’s failure to meet his or her obligation. Sometimes when things don’t go as planned, a secured party may have to dispose of a debtor’s collateral to ensure payment. If a debtor is in default under the terms of the security agreement and the secured party has possession of the collateral, a foreclosure sale is most likely on the horizon.  A secured party has to follow a number of rules in order to legally dispose of the collateral.

Commercial Code

Section 9-610(a) of the foreclosure Uniform Commercial Code states, “After default, a secured party may sell, lease, license, or otherwise dispose of any or all the collateral in its present condition or following any commercially reasonable preparation or processing.” This means the secured party has a number of choices on how to dispose of the collateral in order to generate cash. It is also in the debtor’s interest that the secured party gets a high price for the collateral. This is because the proceeds of the sale pay for expenses incurred in the repossession and sale as well as what is owed to the secured party. If the proceeds do not fully cover the debtor’s obligation, then the debtor is liable for any deficiency. 

Debtors Rights Regarding Foreclosure

A debtor has the right to expect that every aspect of a disposition of collateral including the method, manner, time and place, and other terms, must be commercially reasonable. But a debtor is not without rights during the sale of the collateral. Commercially reasonably doesn’t mean a secured party must get the highest price possible, courts are often suspicious if a price is too low.

Moreover, the notice of disposition is of the utmost importance to debtor as it is only fair to allow the debtor to have a chance to redeem the collateral. If a secured party fails to give reasonable notice or does not sell the collateral in a commercially reasonable manner, the debtor may have a strong defense.

At Lanigan and Lanigan we understand it can be difficult to watch your personal property be put up for sale. That is why attorneys Eric and Roddy Lanigan want to help make sure every transaction is fair and that all the requirements are met. We won’t let things get to the point where you’re having to sell personal items.

Make sure creditors play by the rules and call Lanigan and Lanigan P.L., in Winter Park, Florida. 

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