Michigan Collections Manager License Practice Test

What must a secured party do if they enforce collection of uncollected collateral?

1. Record any transactions publicly

2. Charge back the uncollected collateral

3. Notify the debtor promptly

4. Wait for the agreed period to apply actions

The correct answer is: Charge back the uncollected collateral

The correct answer emphasizes that when a secured party enforces collection on uncollected collateral, they are typically required to charge back that collateral. This action usually involves reversing the initial transaction or applying that collateral against the outstanding debt owed by the debtor. Charging back the collateral reflects the secured party's right to take appropriate measures to recover losses and ensures they take responsibility for uncollectible amounts. The other options do not directly address the necessary action a secured party must take in this situation. For example, recording transactions publicly may be an administrative consideration, but it doesn’t speak specifically to the enforcement of collection. Notifying the debtor is certainly important in maintaining communication and transparency, but it is not the primary action required by the secured party. Waiting for an agreed period before taking further action might apply in other contexts but does not align with the immediate steps needed to enforce collection on collateral that remains uncollected.