§ 9—608. Application of proceeds of collection or enforcement; liability for deficiency and
right to surplus
(a) If a security interest or agricultural lien secures payment or performance of an obligation,
the following rules apply:
(1) A secured party shall apply or pay over for application the cash proceeds of collection
or enforcement under section 9—607 of this title in the following order to:
(A) the reasonable expenses of collection and enforcement and, to the extent provided
for by agreement and not prohibited by law, reasonable attorney’s fees and legal expenses
incurred by the secured party;
(B) the satisfaction of obligations secured by the security interest or agricultural lien
under which the collection or enforcement is made; and
(C) the satisfaction of obligations secured by any subordinate security interest in or
other lien on the collateral subject to the security interest or agricultural lien
under which the collection or enforcement is made if the secured party receives a
signed demand for proceeds before distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a subordinate security interest or other
lien shall furnish reasonable proof of the interest or lien within a reasonable time.
Unless the holder complies, the secured party need not comply with the holder’s demand
under subdivision (1)(C) of this subsection.
(3) A secured party need not apply or pay over for application noncash proceeds of collection
and enforcement under section 9—607 of this title unless the failure to do so would be commercially unreasonable. A secured party that
applies or pays over for application noncash proceeds shall do so in a commercially
reasonable manner.
(4) A secured party shall account to and pay a debtor for any surplus, and the obligor
is liable for any deficiency.
(b) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles,
or promissory notes, the debtor is not entitled to any surplus, and the obligor is
not liable for any deficiency. (Added 1999, No. 106 (Adj. Sess.), § 2, eff. July 1, 2001; amended 2001, No. 46, § 7; 2025, No. 17, § 9, eff. July 1, 2025.)