Also known as: redeems the collateral · redeemed the collateral · redeeming the collateral · redemption of the collateral · right of redemption · redeem collateral
Written by attorneys · grounded in primary & secondary sources — see below
A statutory right held by a debtor or other interested party to recover collateral by satisfying the secured obligation before the secured party disposes of it. The right requires tender of all obligations secured by the collateral plus reasonable expenses.
Elm Design held a junior lien on sound equipment after Harbor Design defaulted on its loan from Crest Creative. Elm Design contacted Crest and offered to pay the full secured balance plus expenses to recover the collateral and keep the venue running. Crest rejected the tender and scheduled an auction instead.
River Ocean granted a security interest in warehouse property located in State B to a lender based in State C. Because State A and State C maintain identical local rules on a debtor's right of redemption, the court aggregated the contacts in those two states and treated them as located in a single jurisdiction for the redemption issue.
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A debtor, any secondary obligor, or any other secured party or lienholder may redeem collateral. Elm Design qualified as a lienholder with a junior interest and therefore possessed standing to pursue redemption after the primary debtor defaulted.
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The redeeming party must tender fulfillment of all obligations secured by the collateral together with reasonable expenses and attorney's fees. A tender limited to the principal balance alone fails when disputed but secured items such as late penalties remain unpaid.
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The right ends once the secured party disposes of the collateral or enters a contract for its disposition. Midnight Hospital lost its redemption right after Sky Clinic executed a binding five-year lease with Imperial Med.
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Contacts located in two or more states that share identical local rules on redemption are treated for choice-of-law purposes as if grouped in a single state. The court therefore aggregates the contacts in State A and State C when deciding the redemption question.
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