A Modified Approach to Article 9 Deficiencies in Missouri
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Unlike real property foreclosures, which are the subject of detailed statutory regulation, Part 5 of Article 9 establishes a free-wheeling system for personal property foreclosures which gives significant latitude to secured creditors. The secured party can "sell, lease or otherwise dispose of any or all of the collateral" so long as proper notice is given and "every aspect of the disposition including the method, manner, time, place and terms. . . [is] . . . commercially reasonable." If the disposition creates a surplus, it must be turned over to the debtor; if part of the debt remains unpaid, the secured party can pursue a deficiency judgment. In theory, this system should benefit both parties by enhancing the amounts realized through foreclosure. In practice, it often leads to erratic results. On occasion, debtors have been denied an effective remedy notwithstanding significant procedural irregularities. More often, the courts have imposed harsh penalties on secured parties who failed to comply fully with the rules. There is some evidence that such overzealous protection of debtors is creating a backlash, causing some creditors to adopt default strategies that insulate them from attack but that also tend to reduce the collateral's disposition value. It would be unfortunate if such strategies became commonplace. The purpose of this article is to examine critically the penalties for creditor misbehavior in Missouri. It will then propose a judicial approach to the problem which is somewhat different from those currently being used. It is hoped that adoption of this approach will help restore balance to the system and inure to the benefit of secured parties and debtors alike.
