When can a secured party pursue deficiency judgments?

When can a secured party pursue deficiency judgments?

• A. When hardware collateral is sold in bulk
• B. When the sale of collateral does not cover the full amount owed
• C. Never, as deficiency judgments are not allowed
• D. After all collateral has been repossessed

Answer: (B)

A secured party can pursue deficiency judgments when the sale of collateral does not cover the full amount owed. This scenario occurs when a debtor defaults on a secured obligation and the secured party repossesses the collateral to recover some of the outstanding debt. After selling the collateral, if the amount recovered from the sale is less than the owed balance, the secured party is entitled to seek a deficiency judgment for the remaining amount. This principle is rooted in the idea that a secured party is entitled to be fully compensated for the debt that remains unpaid after the collateral has been sold. In situations where the sale of the collateral yields insufficient proceeds, the secured party can file a lawsuit against the debtor to recover the shortfall. The other options do not accurately reflect the conditions under which deficiency judgments can be pursued. For example, selling hardware collateral in bulk or repossessing all collateral does not inherently impact the ability to seek a deficiency judgment unless the sale still results in a deficiency. Additionally, deficiency judgments are, in fact, permissible in certain circumstances, countering the notion that they are never allowed.

A secured party can pursue deficiency judgments when the sale of collateral does not cover the full amount owed. This scenario occurs when a debtor defaults on a secured obligation and the secured party repossesses the collateral to recover some of the outstanding debt. After selling the collateral, if the amount recovered from the sale is less than the owed balance, the secured party is entitled to seek a deficiency judgment for the remaining amount.

This principle is rooted in the idea that a secured party is entitled to be fully compensated for the debt that remains unpaid after the collateral has been sold. In situations where the sale of the collateral yields insufficient proceeds, the secured party can file a lawsuit against the debtor to recover the shortfall.

The other options do not accurately reflect the conditions under which deficiency judgments can be pursued. For example, selling hardware collateral in bulk or repossessing all collateral does not inherently impact the ability to seek a deficiency judgment unless the sale still results in a deficiency. Additionally, deficiency judgments are, in fact, permissible in certain circumstances, countering the notion that they are never allowed.