This review list is intended to educate you about this document and to aid you in its preparation. This Demand for Additional Collateral can benefit both the creditor and the debtor by enhancing the creditor’s security position and giving the debtor additional time to repay the loan. This can significantly boost the creditor’s collection percentage as well. We strongly advise pursuing this route following the occurrence of payment difficulties but before to the filing of any additional court documents.
- Make several copies. Send one to the debtor by mail, another via fax, and maintain copies in the creditor’s relevant files.
- In future settlement and/or court proceedings, this good faith step will be weighed in favor of the creditor for attempting to operate reasonably and in good faith. Similarly, it can be employed by the debtor to avoid additional damages awards (in places such as Massachusetts that provide for them on occasion under statutes such as their 93A clause) by their good faith provision of collateral additions. Nonetheless, this is unquestionably a document that best suits the creditor’s interests.
Demand For Additional Collateral
Demand for Additional Collateral
_______________________________
_______________________________
_______________________________DEMAND FOR ADDITIONAL COLLATERAL
Pursuant to the security agreement entered into between the parties on _____________________, the secured party deems itself insecure, and demands that you provide additional collateral with a value of $____(______________ & ____/100 dollars) no later than _________________________. The repayment of the security agreement may be accelerated if such collateral is not provided by that time.
Dated: ___________________
_______________________________________
__________________________ By Secured PartyDemand for Additional Collateral
Review ListThis review list is provided to inform you about this document in question and assist you in its preparation. This Demand for Additional Collateral can help the creditor improve their security position as well as provide the debtor more time to repay the loan. This can radically improve the probability of improving the collection percentage of the creditor as well. We strongly recommend taking this approach after payment problems have been incurred but prior to other court filings.
1. Make multiple copies. Send one to the debtor by mail, another by fax, and keep copies in the related files of the creditor.
2. In any settlement and/or court dealings in the future, this good faith step will be held in favor of the creditor for trying to act in good faith and be reasonable. Similarly it can be used by the debtor to avoid extra damage awards (in states such as Massachusetts that provide them, on occasion, under statutes such as their 93A clause) by their good intent by providing the collateral additions. However, notwithstanding that, this is definitely a document that best serves the purposes of the creditor.
Frequently Asked Questions
What is a demand for additional collateral?
A demand for additional collateral is a formal notice sent by a secured party to a debtor under an existing security agreement. It states that the secured party deems itself insecure and requires the debtor to provide additional collateral of a specified value by a certain deadline. The document also warns that repayment of the security agreement may be accelerated if the collateral is not provided on time.
When should a creditor use a demand for additional collateral?
According to the review list, this approach is strongly recommended after payment problems have been incurred but prior to other court action. It can help the creditor improve their security position and may provide the debtor more time to repay the loan. This can also radically improve the probability of improving the collection percentage of the creditor.
What happens if the debtor fails to provide the additional collateral?
The demand states that the repayment of the security agreement may be accelerated if the additional collateral is not provided by the specified deadline. Acceleration means the full outstanding amount may become immediately due. The document does not specify other consequences beyond acceleration.
How much additional collateral must be provided?
The demand requires additional collateral with a value of a specific dollar amount, which is left blank in the template to be filled in by the secured party. The amount is written in both numeric and word form. The debtor must provide collateral worth at least that amount.
What is the deadline for providing the additional collateral?
The demand specifies a deadline by which the additional collateral must be provided. This date is left blank in the template and must be filled in by the secured party. The debtor must provide the collateral no later than that date to avoid potential acceleration.
What does it mean that the secured party deems itself insecure?
The phrase "deems itself insecure" indicates that the secured party has determined, under the security agreement, that its position is no longer adequately protected. This determination triggers the right to demand additional collateral. The demand does not require the secured party to specify the reasons for its insecurity.
Can a demand for additional collateral help avoid court action?
Yes, the review list suggests that this approach can be taken after payment problems have been incurred but prior to other court action. It may provide the debtor more time to repay the loan while improving the creditor's security position. This can also improve the probability of improving the collection percentage.
Who sends the demand for additional collateral?
The demand is sent by the secured party, as indicated by the signature block labeled "By Secured Party." The secured party is the party that holds the security interest under the security agreement. The document is dated and signed by the secured party.
What information must be included in a demand for additional collateral?
The demand must reference the security agreement entered into between the parties on a specific date. It must state that the secured party deems itself insecure, specify the required value of additional collateral, and set a deadline for providing it. It should also warn that repayment may be accelerated if the collateral is not provided by that time.
Is a demand for additional collateral a legal document?
Yes, it is a formal document sent pursuant to a security agreement. It serves as notice to the debtor of the secured party's demand and the potential consequences of non-compliance. The review list is provided to inform the user about the document and assist in its preparation.
