Section 7 Judicial Foreclosure

• Library: Secured Transactions 2005

Missouri does not clearly authorize judicial foreclosures. But a party desiring the protection of court orders, or possible assistance of a sheriff in foreclosing on collateral, should be able to initiate a judicial proceeding to do so. The most common example of such a proceeding may be a receivership, usually used when real property is involved. Other states have statutes that explicitly authorize judicial UCC foreclosures. See, e.g., Kan. Stat. Ann. §§ 60-1006–60-1010.

4. (§7.8) Suit on Note Before Foreclosure Is Permitted

A creditor is not required to repossess or replevin the collateral before initiating a lawsuit against the borrower on the debt. See State Bank of Fisk v. Omega Elecs., Inc., 634 S.W.2d 234, 239 (Mo. App. S.D. 1982). “The fact that [the creditor] did not repossess or foreclose the security does not establish that the security was impaired.” Id.

B. Non-Judicial

1. (§7.9) Specified by the Parties

The secured creditor and borrower are allowed to negotiate the rights of the creditor upon the occurrence of a default. Section 400.9-601(a), RSMo Supp. 2004. Rights that are typically included in the agreement between the creditor and borrower include:

• the right to request additional collateral, which enables the secured creditor to minimize its risk of nonpayment upon default and allows the borrower to avoid harsher remedies for default like acceleration of the entire debt

• the right to recover collection costs, including attorney fees

• the right of the lender to cure defaults, such as purchasing...