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Secured Transactions
University of North Carolina School of Law
Broome, Lissa Lamkin

1.      Collecting the Debt: How is the debtor’s obligation to pay the creditor enforced if the debtor does not pay voluntarily?
a.       Nonjudicial Methods: faster, cheaper, easier
                                                              i.      Ask debtor to pay
                                                            ii.      May threats to report to credit reporting agency
                                                          iii.      Threaten suit
                                                          iv.      Threaten to deprive person of something that is of value to him: withhold a fitness report for bar for law student who owes school money for damaged property
                                                            v.      Setoff of mature(debt is due) and mutual (Debt is between the two parties as opposed to between a bank and a person and a bank and the same person’s corp.) debts when this is available:
1.      Party A owes party B 5,000 and it is due
2.      Party B owes party A 1,000 and it is due
a.      Debt may be decreased by party A to 4,000 (5,000-1,000)
b.      Limits
                                                              i.      Criminal law
1.      Cannot resort to criminal acts to collect debt (break a kneecap)
                                                            ii.      Tort law
1.      Tort liability limits actions that may be taken to collect debt (defame debtor, invade privacy)
                                                          iii.      Fair Debt Collection Practices Act (statutory scheme)
1.      Federal law that applies for collection efforts of consumer debts
2.      See page nine for restrictions (cannot call before 8am or after 9pm, use obscene language, limit on third parties contacted)
3.      Debt collectors employed by the bank are exempt as employees of the bank attempting to a collect a debt owed to the bank
                                                          iv.      Fair Credit Reporting Act (statutory scheme)
1.      Federal statute
2.      Experian, Equifax, Transunion credit reporting agencies
3.      Creditor may examine credit report to determine if there are any assets that may be collected
4.      Consumer debt only
                                                            v.      Business credit ratings are available through other services but are not covered by the above act
 
 
 
 
 
 
 
 
 
 
 
 
 
2.      Debt Collection: Judicial Methods
a.       Obtaining and enforcing judgments
                                                              i.      File suit
1.      Default judgment may be entered if Debtor makes no response
                                                            ii.      Debtor responds and the creditor may win or lose
1.      Court issues judgment stating how much money creditor is owed
b.      Execution on a judgment to obtain a judgment lien: process of actually getting paid after judgment is obtained
                                                              i.      First step: find assets of the debtor (loan is not secured)
1.      Personal/real property, right to be paid by employer, car
a.       Method is called post-judgment asset discovery
                                                            ii.      Second step: obtain a judgment lien on assets of debtor (prior to this, only an in personam right is held) this transfers it to an in rem right
                                                          iii.      Third: Record judgment in county where the property of the debtor is located
                                                          iv.      Fourth: Writ of execution: obtained from court clerk delivered to the sheriff and the sheriff is directed to levy/seize
1.      Once levy occurs, the property right is transferred to the creditor
2.      Sale is advertised and property is sold at auction: if the sale’s proceeds after deducting costs of sale are insufficient, the creditor may start asset finding process all over again
                                                            v.      Also: Writ of garnishment: property of debtor held by third party
1.      Property is not held by debtor, but by a third person
2.      Asset/wage/property is ordered to be turned over to creditor
c.       Statutes of limitations on judgments: temporal limitations
                                                              i.      Dormancy of judgment
                                                            ii.      Revive judgment
d.      Debtor’s right of redemption: debtor may stop execution prior to any time the sale is completed by redeeming the property by paying the full amount of the judgment and any post-judgment interest that may have accrued and possibly the costs of the sheriff in levying on the sale
e.       Fraudulent transfer: if the transfer is made with the intent to delay or avoid creditor is paying a due debt AND the DR is insolvent
                                                              i.      Statutory right to reclaim property in most states in the Uniform Fraudulent Transfers Act (UFTA)
 
3.      Prejudgment remedies: aimed at curing concerns of the creditor that the debtor will take pre-judgment actions to make himself judgment proof
a.       Writ of Attachment: clerk of court authorizes the sheriff to levy property until the judgment is obtained
b.      Writ of garnishment: stocks, salary
c.       Prejudgment remedies require:
                                                              i.      Court is convinced that exigent circumstances exist
                                                            ii.      Comply with constitutional provision of due process (notice and hearing may be required)
1.      In extreme exigency, state law will require post-levy hearing
                                                          iii.      Creditor must post bond to compensate debtor for harm if creditor does not get judgment in his favor
 
 
 
4.      Exemptions:
a.       For individual debtors, some property will be exempted from being used to compensate creditor
b.      Three basic social policies that embody what may be exempted:
                                                              i.      The debtor ought to be able to continue being a contributing member of society and the debtor should not be stripped of everything and become a ward of the state (clothes, tools of trade, portions of wages, retirement funds, disability payments
                                                            ii.      Items that ar

   Record (9-102): except as used in “for record”, “of record”, “record or legal title” and “record owner” means information that is inscribed on some kind of tangible medium and is stored in an electronic or other medium and is retrievable in perceivable form
                                                              i.      The purpose is to allow for an electronic document to be included
                                                            ii.      See comment number 9 after 9-102: writing does not need to be in writing, the statute is neutral to type of medium used to record (includes intangible form: electronically stored), need not be permanent or indestructible
1.      Could include digital voice mediums (perceivable in tangible form): if this is authenticated, this could verify the security interest
b.      Debtor: 9-102: see problem 2-1: a person having the interest other than a security interest or other lien in the collateral whether or not the person is an obligor; seller of accounts, chattel paper, payment intangibles, or promissory notes; or a consignee (debtor authenticates because this party is putting up the security interest for the loan)
                                                              i.      Obligor: person who owes the payment of the obligation (must pay back lender)
                                                            ii.      Secondary obligor: obligor to the extent that his obligation is secondary (guarantor of loan)
1.      See 9-102 comment 2
e.       Secured Party: 9-102(72): secured party means a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding
 
10. Evidence of An Agreement: Requires Description of COLL and possibly use the Composite Document Doctrine (CDD):
a.       Look for: Description of COLL, granting language and authentication by the DR
 
11. Description
a.       Sufficiency of the description (9-108):
                                                              i.      (a): a description of person or real property is sufficient whether or not it is specific if it reasonably identifies what is described
                                                            ii.      (B): examples of reasonable descriptions:
1.      Specific listing
2.      Category
3.      A type of collateral defined in the UCC (tangible, quasi tangible, intangible)
b.      Collateral: 9-102: means that property subject to a security interest
                                                              i.      The method of perfection depends on the type of the collateral