§ 26-1-9.1-615 — Application of proceeds of disposition; liability for deficiency and right to surplus

Indiana § 26-1-9.1-615

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 9.1: Secured Transactions

Text

(a) A secured party shall apply or pay
over for application the cash proceeds of disposition under IC 26-1-9.1-610 in the following order to:
(1) the reasonable expenses of retaking, holding, preparing for
disposition, processing, and disposing, and, to the extent provided
for by agreement and not prohibited by law, reasonable attorney's
fees and legal expenses incurred by the secured party;
(2) the satisfaction of obligations secured by the security interest
or agricultural lien under which the disposition is made;
(3) the satisfaction of obligations secured by any subordinate
security interest in or other subordinate lien on the collateral if:
(A) the secured party receives from the holder of the
subordinate security interest or other lien a signed demand for
proceeds before distribution of the proceeds is completed; and
(B) in a case in which a consignor has an interest in the
collateral, the subordinate security interest or other lien is
senior to the interest of the consignor; and
(4) a secured party that is a consignor of the collateral if the
secured party receives from the consignor a signed demand for
proceeds before distribution of the proceeds is completed.
(b) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the
interest or lien within a reasonable time. Unless the holder does so, the
secured party need not comply with the holder's demand under
subsection (a)(3).
(c) A secured party need not apply or pay over for application
noncash proceeds of disposition under IC 26-1-9.1-610 unless the
failure to do so would be commercially unreasonable. A secured party
that applies or pays over for application noncash proceeds shall do so
in a commercially reasonable manner.
(d) If the security interest under which a disposition is made secures
payment or performance of an obligation, after making the payments
and applications required by subsection (a) and permitted by subsection
(c):
(1) unless subsection (a)(4) requires the secured party to apply or
pay over cash proceeds to a consignor, the secured party shall
account to and pay a debtor for any surplus; and
(2) the obligor is liable for any deficiency.
(e) If the underlying transaction is a sale of accounts, chattel paper,
payment intangibles, or promissory notes:
(1) the debtor is not entitled to any surplus; and
(2) the obligor is not liable for any deficiency.
(f) The surplus or deficiency following a disposition is calculated
based on the amount of proceeds that would have been realized in a
disposition complying with IC 26-1-9.1-601 through IC 26-1-9.1-628
to a transferee other than the secured party, a person related to the
secured party, or a secondary obligor if:
(1) the transferee in the disposition is the secured party, a person
related to the secured party, or a secondary obligor; and
(2) the amount of proceeds of the disposition is significantly
below the range of proceeds that a complying disposition to a
person other than the secured party, a person related to the
secured party, or a secondary obligor would have brought.
(g) A secured party that receives cash proceeds of a disposition in
good faith and without knowledge that the receipt violates the rights of
the holder of a security interest or other lien that is not subordinate to
the security interest or agricultural lien under which the disposition is
made:
(1) takes the cash proceeds free of the security interest or other
lien;
(2) is not obligated to apply the proceeds of the disposition to the
satisfaction of obligations secured by the security interest or other
lien; and
(3) is not obligated to account to or pay the holder of the security
interest or other lien for any surplus.

Legislative History

As added by P.L.57-2000, SEC.45. Amended by P.L.199-2023, SEC.82.