The financing statement constitutes notice to all subsequent lenders that your lender has a security interest in the collateral described within the statement. The UCC provides that whoever files the financing statement first will also be repaid first if the collateral is sold to repay the loan. If you are unable to repay the loan, you will be in default . If you are in default, your lender may sue you to collect the unpaid loan proceeds. Your lender may also enforce the security agreement by foreclose the security interest.
Foreclosure is the method by which lenders repossess and dispose of the collateral.
If you have possession of the collateral and you are in default, most security agreements permit your lender to repossess the collateral. A lender repossesses collateral by entering your residential or business property and simply removing it. In cases involving accounts receivable, your lender may notify your customers that it has a security interest and request that they send future payments to the lender. If your security agreement requires it, or if for some reason your lender is unable to repossess the collateral, your lender can seek a court order requiring you to give up the collateral. Check the security agreement to see whether the lender must obtain a court order before it can repossess your business assets.