Colorado § 4-9-620 - Acceptance of collateral in full or partial satisfaction of obligation - compulsory disposition of collateral.

§ 4-9-620. Acceptance of collateral in full or partial satisfaction of obligation - compulsory disposition of collateral.

(a) Except as otherwise provided in subsection (g) of this section, a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if:

(1) The debtor consents to the acceptance under subsection (c) of this section;

(2) The secured party does not receive, within the time set forth in subsection (d) of this section, a notification of objection to the proposal signed by:

(A) A person to which the secured party was required to send a proposal under section 4-9-621; or

(B) Any other person, other than the debtor, holding an interest in the collateral subordinate to the security interest that is the subject of the proposal;

(3) If the collateral is consumer goods, the collateral is not in the possession of the debtor when the debtor consents to the acceptance; and

(4) Subsection (e) of this section does not require the secured party to dispose of the collateral or the debtor waives the requirement pursuant to section 4-9-624.

(b) Reserved.

(c) For purposes of this section:

(1) A debtor consents to an acceptance of collateral in partial satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record signed after default; and

(2) A debtor consents to an acceptance of collateral in full satisfaction of the obligation it secures only if the debtor agrees to the terms of the acceptance in a record signed after default or the secured party:

(A) Sends to the debtor after default a proposal that is unconditional or subject only to a condition that collateral not in the possession of the secured party be preserved or maintained;

(B) In the proposal, proposes to accept collateral in full satisfaction of the obligation it secures; and

(C) Does not receive a notification of objection signed by the debtor within twenty days after the proposal is sent.

(d) To be effective under paragraph (2) of subsection (a) of this section, a notification of objection must be received by the secured party:

(1) In the case of a person to which the proposal was sent pursuant to section 4-9-621, within twenty days after notification was sent to that person; and

(2) In other cases:

(A) Within twenty days after the last notification was sent pursuant to section 4-9-621; or

(B) If a notification was not sent, before the debtor consents to the acceptance under subsection (c) of this section.

(e) A secured party that has taken possession of collateral shall dispose of the collateral pursuant to section 4-9-610 within the time specified in subsection (f) of this section if:

(1) Sixty percent of the cash price has been paid in the case of a purchase-money security interest in consumer goods; or

(2) Sixty percent of the principal amount of the obligation secured has been paid in the case of a non-purchase-money security interest in consumer goods.

(f) To comply with subsection (e) of this section, the secured party shall dispose of the collateral:

(1) Within ninety days after taking possession; or

(2) Within any longer period to which the debtor and all secondary obligors have agreed in an agreement to that effect entered into and signed after default.

(g) In a consumer transaction, a secured party may not accept collateral in partial satisfaction of the obligation it secures.

Source: L. 2001: Entire article R&RE, p. 1414, § 1, effective July 1. L. 2023: IP(a)(2), (c)(1), IP(c)(2), (c)(2)(C), and (f)(2) amended, (SB 23-090), ch. 136, p. 567, § 85, effective August 7.

Editor's note: This section is similar to former § 4-9-505 as it existed prior to 2001.

ANNOTATION

Law reviews. For article, "The Revolution in Consumer Credit Legislation", see 45 Den. L.J. 679 (1968). For article, "Commercial Law", see 57 Den. L.J. 165 (1980). For article, "Secured Transactions — Part II: Default, Foreclosure and Bankruptcy", see 12 Colo. Law. 13 (1983).

Annotator's note. Since § 4-9-620 is similar to § 4-9-505 as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

Interest ripens upon retention of collateral following default. When a borrower defaults on its debt to the bank, on or before the filing in bankruptcy, the bank's interest ripens into an interest in real property by virtue of its election to retain the collateral and its compliance with this section, following the bankruptcy court's entry of the abandonment order. Swofford v. Colo. Nat'l Bank, 628 P.2d 184 (Colo. App. 1981).

Article 9 does not determine location of title after default. People ex rel. VanMeveren v. District Court, 619 P.2d 494 (Colo. 1980).

Timeliness of notice. For notice under subsection (2) to be effective, creditor's notification to debtor of his intent to retain collateral must be within sufficient time to allow commercially reasonable sale in event debtor objects. Vogel v. Carolina Intern., Inc., 711 P.2d 708 (Colo. App. 1985).

To constitute notice under this section, the secured party must act in good faith and must take steps a reasonable person would take to effect good faith notice. Vogel v. Carolina Intern., Inc., 711 P.2d 708 (Colo. App. 1985).

A secured party who retains repossessed property for an excessive period of time without compliance with the statutory provisions may not profit by the failure to furnish the requisite notice. Vogel v. Carolina Intern., Inc., 711 P.2d 708 (Colo. App. 1985).

Applied in Am. Heritage Bank & Trust Co. v. O. & E., Inc., 40 Colo. App. 306, 576 P.2d 566 (1978).