elysiansmiles wrote:Maryland has a presumption that collateral taken is equal to the debtor's obligation and wipes out the debt when it talked about the deficiency judgment against the debtor.
Prefacing this with "I don't know Maryland specific law, and so this is general secured transactions stuff" and "secured transactions is a crapshoot for me knowledge-wise," this sounds like one of the possible debtor remedies in the event that the SP does something stupid with the disposition of the property (not commercially reasonable, didn't give notice to all parties, etc).
If it is, so far as I understand the remedy: it's a rebuttable presumption that in the event the SP violated debtor's rights with the disposition of the property whatever the SP got in exchange for the collateral wipes out any deficiency judgment. The SP can rebut this in whole or in part by showing that had he acted in a commercially reasonable manner/not violated debtor's rights, he would have received less than what the debtor owed on the collateral.
So essentially: A's a SP, B's a debtor. B is in the hole for $1000. A repossesses and sells B's...chia pet on which he has a security interest. He doesn't do so in a commercially reasonable manner. A receives $500 and sues B for the deficiency. B says 'whoa, buddy, you can't do that. You messed up the sale and prejudiced me, I shouldn't have to pay the deficiency' and the court says 'yeah, A, what do you have to say about THAT?' and either:
1. A says "well...shit." and the court says "HAH. sucks to be you. Guess the chia pet was equal to the debtor's obligation under your security agreement. No deficiency judgment for you" and then the judge thwacks the gavel and A cries while B skips through a field of debt free daisies.
2. A says "I can miraculously show you that, while I messed up, if I hadn't messed up and instead acted in a commercially reasonable way, i would actually have gotten $700 for the chia pet." The judge will then turn to B and say 'welp, A has successfully rebutted the presumption, in part, that the obligation you owed was equal to what he received in return for the collateral. You are liable for the deficiency to the extent it exceeds what you owed at default minus what A would have received had he acted properly. It sucks, I know. But you owe him $300. At least it isn't $500." And B cries and A...watches with glee because he's a creditor and that's what they do
I seriously need a nap. I'm pretty sure you really weren't even asking how to apply it. I think really the only point i was trying to make when I started this post was that it sounds like it'd be an appropriate thing to talk about if the SP messed up the sale/disposition somehow or otherwise violated the debtor's rights. I would think this would have to only apply if the debtor's rights were violated: if the SP did everything the SP was supposed to do and did it within the bounds of the law without violating the debtor's rights...there's no logical reason a court would still wipe the deficiency judgment: it'd just encourage debtors to take on debt because they'll never be responsible for paying for it. Assuming this is even what you were talking about.