Business owner of an LLC secured a contract worth $35,000 using 100% fully-owned equipment (fair market value of $50,000). Creditor has in his possession part of the equipment (part of a crane), while debtor has another piece to the crane. Creditor also has in his possession 3 other pieces of equipment, 2 which have had work/improvements done on them, and one which is completely unrelated to the contract and has had no improvements or work done to it. Creditor will not release the 3 other pieces of equipment, and wants the full value of the crane ($50,000) for as settlement for the debt ($35,000).
Can the Creditor repossess equipment unrelated to the contract, and if not, what recourse does the debtor have? Can the creditor demand to keep the full value of the secured property even though it exceeds the debt?
Business law is different that consumer law. There are a lot broader allowances since it is generally felt a business agreement is made by a more sophisticated entity than just they lay consumer. For a definitive answer you would need to meet with an attorney who is licensed in your state and ask them.
What I can offer is my opinion on the situation you laid out.
It seems there are two parts to this situation. The first would be what kind of security was pledged as part of the original agreement with the creditor. For that you’d need to turn to the written agreement signed and see if a security interest was given for all material owned.
Secondly, you’d need to address the situation by looking at your State law or the State that applies in this situation.
What I would urge you to do is to find a local attorney and go meet with them. They will be the only ones to give you a best shot at a definitive answer.
Please post your responses and follow-up messages to me on this in the comments section below.