§ 12A-1-9-620. Acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral.

ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL SATISFACTION

OF OBLIGATION; COMPULSORY DISPOSITION OF COLLATERAL

(a)  Except as otherwise provided in subsection (g) of this section, a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:

(1)  the debtor consents to the acceptance under subsection (c) of this section;

(2)  the secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal authenticated by:

(A)a person to which the secured party was required to send a proposal under Section 1-9-621 of this title; or

(B)any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;

(3)  if the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; and

(4)  subsection (e) of this section does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to Section 1-9-624 of this title.

(b)  A purported or apparent acceptance of collateral under this section is ineffective unless:

(1)  the secured party consents to the acceptance in an authenticated record or sends a proposal to the debtor; and

(2)  the conditions of subsection (a) of this section are met.

(c)  For purposes of this section:

(1)  a debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default; and

(2)  a debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record authenticated after default or the secured party:

(A)sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;

(B)in the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and

(C)does not receive a notification of objection authenticated by the debtor within twenty (20) days after the proposal is sent.

(d)  To be effective under paragraph (2) of subsection (a) of this section, a notification of objection must be received by the secured party:

(1)  in the case of a person to which the proposal was sent pursuant to Section 1-9-621 of this title, within twenty (20) days after notification was sent to that person; and

(2)  in other cases:

(A)within twenty (20) days after the last notification was sent pursuant to Section 1-9-621 of this title; or

(B)if a notification was not sent, before the debtor consents to the acceptance under subsection (c) of this section.

(e)  A secured party that has taken possession of collateral shall dispose of the collateral pursuant to Section 1-9-610 of this title within the time specified in subsection (f) of this section if:

(1)  Sixty percent (60%) of the cash price has been paid in the case of a purchase-money security interest in consumer goods; or

(2)  Sixty percent (60%) of the principal amount of the obligation secured has been paid in the case of a non-purchase-money security interest in consumer goods.

(f)  To comply with subsection (e) of this section, the secured party shall dispose of the collateral:

(1)  within ninety (90) days after taking possession; or

(2)  within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and authenticated after default.

(g)  In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.

Added by Laws 2000, c. 371, § 127, eff. July 1, 2001.