It should go without saying that as a secured creditor you should be aware of the location of any and all collateral in the debtor’s possession that is the subject of your security interest. However, one would be surprised at how many secured creditors do not know this vital information when it comes time to file suit, or are surprised to learn that the debtor is hiding the collateral after suit has been filed.
Once a debtor starts to fall behind on payments, in addition to demanding payment, the debtor should also be asked where the collateral is located. At this early stage, the debtor is going to be more willing to give the secured creditor’s representative information because the debtor believes that the creditor will still work with him. Often, it is once the creditor decides to enforce its security that the debtor decides to go silent.
Knowing the location of your collateral prior to taking legal action will give you the option of a pre-judgment writ of seizure. A pre-judgment writ of seizure allows a secured creditor to take possession of the collateral prior to obtaining a judgment for possession. This remedy is used when it is thought that the debtor may attempt to hide or damage the collateral. Pre-judgment seizure is a very detailed and complicated process that your creditors rights attorney can explain to you.
An additional benefit of knowing where your collateral is located at all times is the ability to utilize “self help” to recover the collateral upon the debtor’s default. However, when exercising “self help” there cannot be a “breach of the peace.” Courts have held that a “breach of the peace” has occurred when a repossession agent continued to take collateral despite the debtor’s verbal demands to cease action. Thus, as a practical matter, “self help” is often not a viable option.
Regardless, knowing the location of your collateral will enable both your creditors rights attorney and the sheriff to move quickly in coordinating recovery. Once you become engaged in a “treasure hunt,” it is only going to cost more in court costs and fees to recover your collateral.