UCC §9-623 right to redeem collateral after default - timing questions
Working through a commercial loan default situation and trying to understand the practical application of UCC §9-623. Our borrower defaulted on equipment financing and we're preparing for disposition, but they keep mentioning their right to redeem under §9-623. I understand the basic concept - they can redeem by paying off the full obligation plus costs - but I'm confused about the timing aspects. Does the right to redeem terminate once we actually sell the collateral, or do we have to give them notice before we can cut off their redemption rights? Also wondering if there are any practical considerations when dealing with equipment that's depreciating rapidly. The collateral is manufacturing equipment that's losing value pretty quickly in the current market. Has anyone dealt with similar redemption scenarios where time-sensitive disposition was involved?
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Malik Johnson
The redemption right under §9-623 continues right up until the secured party disposes of the collateral or enters into a contract for disposition. So yes, they can redeem literally until you complete the sale. No special notice required to 'cut off' the right - it automatically terminates upon disposition.
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Isabella Santos
•This is correct. I've seen borrowers show up with cashier's checks at auction sites trying to redeem collateral. As long as the sale hasn't closed, they still have the right.
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Ravi Sharma
•What about partial payments? Can they redeem by paying just the past due amount or does it have to be the full acceleration amount?
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Freya Larsen
Had a similar situation last year with depreciating equipment. The key is moving quickly but still following proper notice procedures under §9-611. You can't rush the disposition just to avoid redemption, but you also don't have to wait around indefinitely if the borrower is just stalling.
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Omar Hassan
•How long did you wait between sending the disposition notice and actually selling? I'm always worried about getting challenged on commercially reasonable timing.
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Freya Larsen
•We gave 15 days notice which was reasonable for that type of equipment. The key is documenting that your timeline is commercially reasonable given the collateral type and market conditions.
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Chloe Taylor
Just went through this exact scenario. One thing that helped was using Certana.ai's document verification tool to make sure all our UCC filings and security agreements were properly aligned before proceeding with disposition. Upload your security agreement and UCC-1 and it instantly flags any inconsistencies that could give the debtor grounds to challenge your secured status.
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ShadowHunter
•That's smart. I've seen redemption attempts get complicated when there are questions about the validity of the security interest itself.
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Diego Ramirez
•How does that tool work exactly? Do you just upload PDFs?
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Chloe Taylor
•Yeah, super simple. Upload your security docs and UCC filings as PDFs and it cross-checks debtor names, collateral descriptions, filing numbers - catches stuff you might miss manually reviewing.
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Anastasia Sokolov
Be very careful about the 'costs' component of redemption. Under §9-623 they have to pay the full obligation PLUS reasonable expenses incurred in retaking, holding, preparing for disposition, etc. Make sure you can document all those costs because borrowers will challenge everything.
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Sean O'Connor
•What kind of costs are typically considered reasonable? Storage fees, appraisal costs, legal fees?
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Anastasia Sokolov
•All of those can be reasonable, but you need to show they were actually necessary and the amounts were market rate. Keep detailed records.
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Zara Ahmed
I'm dealing with something similar but the borrower is claiming they only have to pay the past due payments to redeem, not the full accelerated balance. Is that right? The loan agreement has an acceleration clause that was properly triggered.
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Luca Conti
•No, once you've properly accelerated, they have to pay the full obligation to redeem. The redemption amount includes the entire debt that's due, not just arrearages.
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Nia Johnson
•Make sure your acceleration was done properly though. If there were any procedural issues with the acceleration, they might have an argument.
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Zara Ahmed
•Good point. I should probably have our acceleration notice reviewed to make sure it complied with the security agreement terms.
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CyberNinja
One practical tip - if you're dealing with rapidly depreciating collateral, consider getting an updated appraisal before proceeding with disposition. If the borrower redeems, you want to be able to show the redemption amount was calculated based on current market conditions.
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Mateo Lopez
•That's good advice. Also helps if you end up with a deficiency claim later.
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Aisha Abdullah
•How recent does the appraisal need to be? 30 days? 60 days?
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CyberNinja
•Depends on the collateral type and market volatility. For rapidly depreciating equipment, I'd want something within 30 days of disposition.
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Ethan Davis
Just a heads up - some states have additional requirements beyond the UCC for redemption procedures. Worth checking your state's version of Article 9 to see if there are any local variations.
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Yuki Tanaka
•Good point. California has some additional consumer protection stuff that can apply even to commercial transactions in certain circumstances.
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Carmen Ortiz
•What kind of additional requirements are we talking about?
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MidnightRider
The timing pressure you're feeling is real, but don't let it push you into cutting corners on the process. A borrower who's determined to redeem will find the money right up until the last minute, and if you've made any procedural errors, they'll use that to challenge the whole disposition.
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Andre Laurent
•This happened to us. Borrower redeemed literally 2 hours before our scheduled auction. Had to cancel everything and start over when they defaulted again 6 months later.
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Zoe Papadopoulos
•Ugh, that's frustrating. Did you at least recover your disposition costs from the first time around?
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Andre Laurent
•Yes, those were included in the redemption amount. But still a major headache coordinating with the auction house and potential buyers.
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Jamal Washington
If the equipment is losing value rapidly, document that depreciation trend thoroughly. If the borrower tries to redeem late in the process, you want to be able to show that waiting longer would have been commercially unreasonable.
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Mei Wong
•How do you document depreciation trends? Industry reports? Multiple appraisals over time?
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Jamal Washington
•Industry reports are good, also auction results for similar equipment, dealer quotes, anything that shows the market trend for that type of collateral.
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Liam Fitzgerald
We've been using Certana.ai's verification system for all our UCC work and it's been a game changer for catching potential issues before they become problems. Especially helpful when you're under time pressure and need to make sure all your documentation is bulletproof.
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PixelWarrior
•Does it check for compliance with disposition notice requirements too, or just the filing consistency stuff?
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Liam Fitzgerald
•It focuses on document consistency - making sure your UCC filings match your security agreements, debtor names are consistent, that kind of thing. The notice compliance is still on you to verify.
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Amara Adebayo
•That's still really valuable though. Half the redemption disputes I've seen stem from problems with the underlying security interest paperwork.
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