Michigan Collections Manager License Practice Test

What should a secured party provide upon request by a debtor after disposition?

1. A timeline of the disposal process

2. A budget of the transactions involved

3. An explanation of the calculation of surplus

4. A valuation assessment of the collateral

The correct answer is: An explanation of the calculation of surplus

After a disposition of collateral, if a debtor requests information from a secured party, the secured party is typically required to provide an explanation of how any surplus was calculated. This is important because it ensures transparency in the transactions that have taken place and helps the debtor understand the financial implications of the disposition process. By explaining the calculation of surplus, the secured party demonstrates compliance with legal obligations and provides clarity on how proceeds from the collateral were managed and distributed. In many jurisdictions, the law mandates that the secured party must not only dispose of the collateral in a commercially reasonable manner but also provide certain disclosures to the debtor, particularly if there is a surplus remaining after satisfying the debt. This fosters a sense of accountability and protects the debtor's rights, allowing them to receive any surplus funds owed to them following the sale or other disposition of the collateral. Understanding the surplus calculation enables the debtor to verify the secured party's adherence to these obligations and is a key aspect of the debtor's rights in this context.