The Jensen Litigation Firm, PLLC represents creditors and individuals in loan disputes. People hire us to understand their rights under loans and security agreements, and to enforce those rights. If you need an attorney to fight for your rights in a dispute over a loan default or loan collateral, we can help. Contact us now to promptly enforce your rights.
What are the basics of loan transactions?
When a creditor lends money to a borrower, they often sign a promissory note and a security agreement. A promissory note sets forth the loan and repayment terms, while the security agreement discusses collateral for the debt. General contract principles will apply to the loan transaction, but issues regarding secured collateral are generally governed by UCC Article 9. See Minn. Stat. § 336.9-101, et seq.
How does loan collateral work?
Creditors generally seek a list of the borrower's property before finalizing the loan, and seek assurances that the borrower has good title to the property. During the underwriting process, the creditor selects appropriate items to use as loan collateral.
A security agreement should then specify the collateral with appropriate detail, such as with serial numbers or VIN numbers. Minn. Stat. § 336.9-108 indicates that a categorical description of property may be sufficient if it reasonably identifies the property.
The more detailed the security agreement, the less likely that a dispute could later arise over whether property was secured as loan collateral.
How is a lien “perfected”?
In addition to signing the loan documents with the borrower, the creditor may need to perfect its interest in the collateral. Perfecting the lien depends significantly on the type of property.
Mortgages, for example need to be filed with the local recorder's office. For certain personal property items, a UCC-1 filing is often made. The purpose is for the creditor to give the borrower and the world notice that a particular item is secured as that creditor's collateral. This allows other creditors to cross-check the property to avoid securing the same property to its loan.
What remedies does a lien-holder have?
Creditors have many remedies for a borrower's breach of the note and security agreement. Remedies may include claims for:
- Breach of contract
- Lien foreclosure
- Voidable or fraudulent transfer
- Charging order
- Other remedies
The type of remedy depends on the loan collateral. The borrower sometimes agrees to voluntarily turn over secured collateral without the need for the creditor to formally seize it.
What are common issues with collecting on a loan?
Loan collection disputes are common. There are threshold questions about whether the property is even covered by a security agreement. Even if the property is covered by the agreement, there could still be problems about whether the creditor perfected a lien.
If there is a perfected lien, there may still be a question about lien priority. If the creditor has a perfected lien and can show a borrower's breach of the note and security agreement, it must follow proper procedures in taking and disposing of collateral.
Generally, a creditor must sell or dispose of collateral in a commercially reasonable manner under Minn. Stat. § 336.9-610. Because the sale proceeds offset the debt total, a borrower will want the sale to yield a maximum price. A higher price will limit any deficiency the borrower may owe to the creditor on the loan.
Why is it important to hire an attorney for a loan collection issue?
Loans with collateral can have complexity, and it may be necessary to have a competent attorney handle any dispute.
We have the knowledge and experience to handle loan collection disputes. Do not hesitate to contact us if:
- You are a creditor seeking to collect on a business or personal loan, such as through court actions, asset seizures, replevins, sheriff sales, receivership, or other UCC remedies.
- You are a creditor with an interest in collateral that another creditor is seeking to collect upon.
- You are a business or individual borrower that has received notice of a collateral repossession.
- You are a business or individual borrower that has been sued for a loan default.
- You have purchased, or are about to purchase, property that may have lien issues.