Also known as: acceptance of collateral · accept the collateral · strict foreclosure
Written by attorneys · grounded in primary & secondary sources — see below
A procedure under which a secured party retains collateral in full or partial satisfaction of the debtor's obligation. The debtor must consent after default in an authenticated record for the acceptance to be effective. Acceptance discharges the obligation to the extent agreed and cuts off the debtor's right to redeem the collateral.
Anika Anand borrowed from Alliance Holdings and granted a security interest in her construction equipment. After default, Alliance repossessed the equipment and proposed to keep it in full satisfaction of the debt. Anika authenticated a record agreeing to the terms. The acceptance discharged the obligation and ended Anika's redemption rights.
Albert Allen and Amelia Amari held a security interest in equipment and inventory worth far less than the outstanding debt. They repossessed the items and later sold them to themselves. Because no authenticated record showed consent to acceptance in full satisfaction, the court permitted a deficiency judgment.
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The debtor must agree to the terms in an authenticated record after default. Without this record, any purported acceptance is ineffective.
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Acceptance in full or partial satisfaction cuts off the right to redeem the collateral under UCC § 9-623. Redemption remains available only before acceptance, collection, or disposition.
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No. Acceptance in full satisfaction discharges the obligation and precludes any deficiency claim. Partial acceptance discharges the obligation only to the extent of the agreed value.
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