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The enforceability of security interests in consumer goods

Schwartz, Alan (1983) The enforceability of security interests in consumer goods. Journal of Law and Economics, 26 (1). pp. 117-162. ISSN 0022-2186.

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Consumers who grant security interests to creditors pay lower rates in return, but this seemingly innocuous arrangement has recently been regulated extensively. The Uniform Consumer Credit Code authorizes courts not to enforce certain security interests if enforcement would impose "undue hardship" on the consumer. Several states also prohibit creditors who foreclose from later suing for deficiency judgments, in which they attempt to recover the difference between the unpaid debt and the amount realized on foreclosure. This prohibition reduces the attractiveness of security as a risk reduction device. In addition, proposals have been made to prevent creditors from taking security interests in consumer goods collateral except for purchase money security interests.

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Additional Information:© 1983 The University of Chicago Press. Published for The Booth School of Business,University of Chicago and The University of Chicago Law School. This paper was originally given as an Addison Harris lecture at Indiana University Law School (Bloomington). I am grateful for the extraordinary hospitality extended to me by the Indiana Law School and for the useful comments its faculty made on a prior version of the paper. The paper also benefited from comments received at a seminar in contract theory held in the Berkeley Law School and at workshops held at the USC Law Center and the Northwestern University Law School. In addition, Alan Axelrod, Melvin A. Eisenberg, Thomas Jackson, Will T. Jones, Michael Moore, Stephen J. Morse, Margaret Jane Radin. John Schmitz, Matthew Spitzer, James Strnad, and Louis Wilde also made very helpful suggestions. Portions of this paper appear in different form in Alan Schwartz and Robert Scott, Commercial Law: Principles and Policies (1982). Formerly SSWP 423.
Subject Keywords:Debtors, Creditors, Resale, Cartels, Creditor claims, Consumer goods, Automobiles, Market prices, Consumer credit, Security interests
Issue or Number:1
Record Number:CaltechAUTHORS:20171116-141511314
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83261
Deposited By: Jacquelyn Bussone
Deposited On:16 Nov 2017 22:24
Last Modified:03 Oct 2019 19:04

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