Published — May 2, 2021
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
Read also: RIGHT TO PROCEEDS AND COMMINGLED FUNDS AND MONEY UNDER PERSONAL PROPERTY SECURITY ACT
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The secured creditor may enforce its security interest whether through a judicial process or through an extra-judicial process.
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The secured creditor may take possession of the collateral without judicial process if the security agreement so stipulates, provided, that possession can be taken without a breach of the peace.
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If the collateral is a fixture, the secured creditor, if it has priority over all owners and mortgagees, may remove the fixture from the real property to which it is affixed without judicial process.
How may a creditor enforce its security interest?
The Implementing Rules and Regulations of Republic Act No. 11057 (Personal Property Security Act) provides that:
The secured creditor may enforce its security interest whether through a judicial process or through an extra judicial process, including the sale of the secured assets through either a public or private disposition.
The secured creditor may take possession of the collateral without judicial process if the security agreement so stipulates. Provided, that possession can be taken without a breach of the peace. Breach of the peace shall include entering the private residence of the grantor without permission, resorting to physical violence or intimidation, or being accompanied by a law enforcement officer when taking possession or confronting the grantor.
If the collateral is a fixture, the secured creditor, if it has priority over all owners and mortgagees, may remove the fixture from the real property to which it is affixed without judicial process. The secured creditor shall exercise due care in removing the fixture.
If, upon default, the secured creditor cannot take possession of collateral without breach of the peace, the secured creditor may proceed as follows:
- The secured creditor shall be entitled to an expedited hearing upon application for an order granting the secured creditor possession of the collateral. Such application shall include a statement by the secured creditor, under oath, verifying the existence of the security agreement attached to the application and identifying at least one event of default by the debtor under the security agreement
- The secured creditor shall provide the debtor, grantor, and, if the collateral is a fixture, any real estate mortgagee, a copy of the application, including all supporting documents and evidence for the order granting the secured creditor possession of the collateral; and
- The secured creditor is entitled to an order granting possession of the collateral upon the court finding that a default has occurred under the security agreement and that the secured creditor has a right to take possession of the collateral. The court may direct the grantor to take such action as the court deems necessary and appropriate so that the secured creditor may take possession of the collateral.
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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