Gateway sold a big-screen TV and entertainment center to Iris for $2000 on credit. Iris signed a promissory note and gave Gateway a security interest in the TV and entertainment center. Gateway filed a financing statement in the appropriate public office. When Iris defaulted on her monthly payments owing a balance of $1780, Gateway's attorney made arrangements to have the TV and entertainment
center repossessed. The attorney then placed classified ads in the local newspaper to sell the goods. The attorney's fees are $300, the repo company charged $150, and the advertising costs are $50. (
A) Is Iris able to redeem the property? (B) If Iris does not redeem and the TV and entertainment center are sold for $1750, how will the money be disbursed?
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(A) Yes, Iris may redeem the property. Up to the time that the secured party disposes of the collateral, the debtor has the right to redeem it. This means that the debtor can regain possession of the collateral if she pays the full balance of the note.
(B) If Iris does not redeem and the TV and entertainment center sell for $1750, the sale proceeds will be distributed as follows:
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Sale Proceeds
$1750.00
- Attorney's Fees
-$300.00
- Repo Co.
-$150.00
- Advertising
-$50.00
Balance
$1250.00
to be applied to the loan balance of $1780.
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This leaves a deficiency balance of $530. Gateway can sue Iris to obtain a general unsecured judgment for this deficiency balance.
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