Section 2 Waiver Despite Anti-Waiver Clauses

• Library: Secured Transactions 2005

Often the costs of enforcing default remedies result in the secured creditor exhibiting some leniency to a debtor in default. The leniency can be a negotiated condition of the secured transaction that would provide the debtor with a fixed time period to cure a missed payment or produce evidence of adequate protection for the collateral, such as insurance for a vehicle. The leniency may also be required by law, such as the prohibition against accelerating outstanding consumer loan indebtedness or repossession of consumer loan collateral until the expiration of a 20-day period after the secured lender provides the debtor with a notice of the right to cure the default. See § 408.555.1, RSMo 2000.

Beyond the leniency required by the security agreement or law, the secured creditor may choose to wait before beginning enforcement of default remedies in order to determine if the debtor will be able to cure the default. There is a risk associated with a secured creditor’s decision to wait—apart from the obvious risks of nonpayment or further impairment of the collateral. If a secured creditor routinely tolerates a debtor’s late payment or inability to...