Notice Before Selling Secured Property
When a finance company has a loan secured by a specific piece of the debtor's personal property (such as a car loan or loan for a small business to purchase computers), if the debtor misses payment, then the creditor can take the property and sell it to pay off the remaining debt. Under Tennessee's adoption of the UCC, the finance company must notify the debtor before selling the property so that the debtor can either pay off the debt or help ensure the property sells for a fair price. Tennessee law requires that the finance company send notice to the debtor in a reasonable manner.
The Western Section Court of Appeals ruled last week that sending one notice by certified mail, with no receipt actually returned, is not reasonable. The debtor cannot actively evade notice, but neither can the creditor simply go through the motions before selling the property. In the Court of Appeals' words:
Notice which is a mere gesture is not notice. The means employed must be such as one desirous of actually informing the absent party might reasonably adopt.
Read the case, Federal Express Credit Union v. Lanier, here.
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