N.Y. Uniform Commercial Code 9-620 – Acceptance of Collateral in Full or Partial Satisfaction of Obligation; Compulsory Disposition of Collateral
Section 9–620. Acceptance of Collateral in Full or Partial Satisfaction
Terms Used In N.Y. Uniform Commercial Code 9-620
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
of Obligation; Compulsory Disposition of Collateral.
(a) Conditions to acceptance in satisfaction. Except as otherwise provided in subsections (g) and (h), 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);
(2) the secured party does not receive, within the time set forth
in subsection (d), 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 9–621; 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) does not require the secured party to dispose
of the collateral or the debtor waives the requirement
pursuant to Section 9–624.
(b) Purported acceptance ineffective. 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) are met.
(c) Debtor's consent. 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 days after the
proposal is sent.
(d) Effectiveness of notification. To be effective under subsection (a)(2), 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 9–621, within 20 days after notification
was sent to that person; and
(2) in other cases:
(A) within 20 days after the last notification was sent
pursuant to Section 9–621; or
(B) if a notification was not sent, before the debtor
consents to the acceptance under subsection (c).
(e) Mandatory disposition of consumer goods. A secured party that has taken possession of collateral shall dispose of the collateral pursuant to Section 9–610 within the time specified in subsection (f) if:
(1) sixty percent of the cash price has been paid in the case of
a purchase-money security interest in consumer goods; or
(2) sixty percent 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) Compliance with mandatory disposition requirement. To comply with subsection (e), the secured party shall dispose of the collateral:
(1) within 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) No partial satisfaction in consumer transaction. In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.
(h) Special provisions for cooperative interests. A secured party whose collateral consists of a residential cooperative interest used by the debtor and whose security interest in such collateral secures an obligation incurred in connection with financing or refinancing of the acquisition of such cooperative interest and who chooses to accept that cooperative interest in full satisfaction of the debtor's obligation may do so.
(1) If the secured party sends a proposal to take the cooperative interest in full satisfaction of the debtor's obligation, the proposal shall be accompanied by a notice in the form and manner prescribed in subsection (f) of section 9-611 of this subpart, unless the secured party has previously sent the debtor such notice. A debtor consents to an acceptance of a cooperative interest in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the proposal in a record authenticated after default.
(2) A debtor may propose to the secured party that it take the cooperative interest in full satisfaction of the obligation it secures. The proposal shall be ineffective unless the secured party consents to the proposal in an authenticated record.