Attorney Deanne Koll explains what constitutes a “commercially reasonable” sale of collateral.
Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.
Once a lender eventually repossesses collateral after default, the law requires that the eventual sale of that collateral be done in a “commercially reasonable” manner. So, what does that mean?
The primary focus of the commercial reasonableness of a given sale is not the proceeds from the eventual sale, but rather the procedures employed for the sale.
If the secured creditor makes certain that conditions of the sale, in terms of the aggregate effect of the manner, method, time, place and terms employed conform to commercially accepted standards, the creditor should be shielded from any liability.
Wisconsin authorizes the disposition of collateral in either public or private proceedings, so long as a standard of commercial reasonableness is followed.
Wisconsin Courts have held that the secured party must choose between a public or private sale depending on which is more commercially reasonable.
In sum, there’s no clear-cut answer as to what is commercially reasonable. Therefore, it would be wise to review each sale on a case-by-case basis or discuss the potential sale with your attorney.