Secured Transactions

• Secured transactions are simply a type of mortgage for property, where a seller gives a buyer property in exchange for a promise to repay the stated purchase price at some point in the future with interest. The collateral for the loan is the underlying property the buyer obtains. Collateral is an asset a borrower owns that can be seized by the lender if the borrower does not meet his obligation to repay the loan. If the individual cannot pay, the seller can retake the underlying property to sell and recover what he is owed.
  
  To have a secured transaction, the property in question must be attached and the claim perfected. An attachment is a written agreement stating the terms of the agreement, such as the amount borrowed and the property that is to be seized. Perfection is about establishing priority amongst other claims. It is a formal declaration establishing to all other parties that might have a claim to the underlying property that your claim is the most important and that in case of default, you get paid first. Article 9 of the Uniform Commercial Code (UCC) defines these transactions, lists the rights and remedies of the parties, and has been adopted by all states.
  
  

Redemption Defined

• Redemption is an option available to lenders who have defaulted and have had the underlying property seized. Redemption is their opportunity to retake the property from the debt holder who seized the property to settle the loan. This option is also available to any other party that has an interest in the property. Generally, a debtor cannot waive his right to redemption under any circumstances. However, if the transaction involves consumer goods, the debtor may waive his rights after he defaults.
  
  

Redemption Process

• The redemption process is straightforward. All that is required is for the debtor to pay the lender the amount of the original obligation plus all reasonable expenses and attorney's fees that the lender incurred enforcing the transaction and seizing the property. Redemption must occur before the underlying asset is sold or the creditor formally states that she accepts the asset as satisfaction of the obligation.
  
  

Tips

• If you have entered into or are considering entering into a secured transaction, consider consulting with a licensed attorney. An attorney can provide advice based on your particular circumstances, and may be able to provide alternative options for the transaction you want to achieve.