Digital Devices is a retail seller of entertainment media. Digital Devices sells a 3D HD TV set to Edmund. Edmundcannot pay cash, so he signs a security agreement, paying a certain amount down and agreeing to pay the balance in twelve equal

Question

installments. The security agreement gives Digital Devices a security interest in the set. Edmundmakes six payments on time then goes into default because of unexpected financial problems. Digital Devices repossesses the set. Can the creditor keep it in full satisfaction of the debt? Explain.

Answer 1

Generally, under Article 9, a secured party, on repossession of the collateral, has the right to keep it in full satisfaction of the debt (on proper no¬tice and if no objection is received within twenty-one days) or to sell it or dispose of it, using the proceeds to cancel the debt. If the debtor has paid 60 percent of the cash price of a purchase-money security interest in consumer goods and has not after de¬fault signed a waiver of rights, the secured party cannot keep the col¬lateral in full satisfaction of the debt. The secured party is forced to dispose of the collat¬eral within ninety days [UCC 9–620(f)]. Consumer goods are defined as those used or bought primarily for per¬sonal, family, or household purposes [UCC 9–102(a)(23)].
In this case, Edmundhas paid $400 ($100 down plus six $50 payments) of the $600 purchase price. Because the security interest is pur¬chase money in consumer goods and the amount paid exceeds 60 percent of the price, Digital Devices cannot keep the repossessed set in full satisfaction of the debt. Therefore, Digital Devices has a duty to sell, lease, or otherwise dispose of the collateral and to ap¬ply the proceeds as prescribed in UCC 9–610.