Also known as: retain collateral · retaining collateral · retained collateral · strict foreclosure
Written by attorneys · grounded in primary & secondary sources — see below
A secured party's election under the Uniform Commercial Code to keep collateral in full or partial satisfaction of the debtor's obligation without conducting a disposition. The election requires the debtor's consent or the absence of objection after proper notice and applies to all types of collateral.
Rhea Reynolds defaulted on a loan secured by business equipment held by Reliance Finance after missing several payments. Reliance invoked retention of collateral under the UCC and provided proper notice. The court entered judgment allowing Reliance to keep the equipment in full satisfaction of the debt without a sale.
Rising Sun Electronics repossessed computers and a file cabinet from Denver Place Associates after default. Rising Sun retained the items for an extended period without selling them. The court held that prolonged retention without disposition could constitute a commercially unreasonable practice giving rise to a damages claim.
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A secured party may retain collateral in full or partial satisfaction of the obligation when the debtor consents or fails to object after receiving proper notice under UCC § 9-620. This option applies to any type of collateral and avoids the need for a disposition.
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Yes. Retention for an excessive period without disposition may be commercially unreasonable and give rise to a claim for damages even if no sale occurs. Courts have recognized this principle in applying the UCC's commercial reasonableness standard.
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Retention of collateral under the UCC allows a secured party to keep personal property in satisfaction of the debt. Strict foreclosure in real property is a judicial remedy that terminates the mortgagor's equity of redemption without a sale when authorized by the mortgage or state law.
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