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Exercise 15

Debt Collection, Debtor Default, and Reposessions

Vicky buys a piano from Pianos, Inc. using her cello as collateral. Vicky fails to make several of the payments on the piano and Pianos, Inc. takes possession of her cello. Pianos, Inc. sends Vicky a notice it is going to sell her cello at auction on May 5, at 2 p.m. at its place of business. Vicky calls Pianos, Inc. to find out how much she owes it for the piano. She arrives on May 5 at 11 a.m. at its place of business with the money to cover just the amount that she owes Pianos, Inc. for the instrument. Pianos, Inc. refuses to accept the money, saying that she also owes it attorney fees.

How should the judge rule?

A. For Pianos, Inc., because Vicky still has not paid it properly.
ANSWER "A" IS CORRECT. Vicky, as the debtor, has the right to redeem her cello at any point before Pianos, Inc. sells it. Since Pianos, Inc. has not yet sold the cello, she still has the right to redeem the cello. However, in order to recover her cello, Vicky must pay not only the amount she owes for the piano, but also for the costs Pianos, Inc. has incurred in getting possession of and selling the cello. Therefore, Vicky may not yet redeem her cello.
B. Vicky should be allowed to pay Pianos, Inc. and get back her cello.
ANSWER "B" IS NOT CORRECT. Please try again.