Text 3 Termination of a Secured Transaction

Most secured transactions are terminated by the debtor’s paying the debt in full and the creditor’s releasing the security interest in the collateral. If the creditor has filed the financing statement, this release is made when the creditor files an acknowledgment of the full payment, called a termination statement, with the governmental statement. Filing the termination statement is a way to inform the potential buyers and creditors that the property is no longer collateral.

When the debtor fails to pay as promised, the secured creditor who does not have possession of it. Then the creditor may sell, lease, or otherwise dispose of the collateral. This right of sale also applies to the secured creditor who has retained possession of the property.

The proceeds from sale are applied to the reasonable expenses of retaking, holding, preparing for resale, and reselling. They are applied also to payment of reasonable attorney’s fees and other legal expenses incurred. What remains of the proceeds then goes to pay off the secured remains of the proceeds then goes to pay off the secured debt. In some cases, other creditors may have subordinate (or secondary) security interests in the collateral, and these are now paid off if proper claims have been made. Finally, if any surplus remains, it goes to the debtor. If there is any deficiency, the debtor is obliged to pay it unless otherwise agreed. If the proceeds fail to equal the balance due, including all costs of repossession and resale, the debtor is liable fro the deficiency unless otherwise agreed. In the unlikely event that a surplus exists, it belongs to the debtor.

As an alternative to resale, the secured creditor may retain the collateral in full statement of the debt.

Even when in default, the debtor does not forfeit all rights.

Additional protection is given to consumers who have paid 60% or more of the debt. In this case the creditor may not keep the collateral in satisfaction of the debt unless the consumer agrees in writing. This law seeks to protect consumers in situations where the value of the goods exceeds the amount of the debt.

Vocabulary

termination statement заявление о признании выплаты обеспеченного долга

to release the security interest отказываться от права на обеспечение

settlement расчет, уплата

proceeds (from sale) доход (от продажи)

balance due недостающая сумма

subordinate interests второстепенные интересы

deficiency недостаток, недостаточность, отсутствие

payoff выплата; время выплаты

to forfeit rights лишаться права; потерять право

satisfaction of debts уплата долга

repossession изъятие за неплатеж