What happens when the secured creditor disposes the debtor’s collateral?

Disposal of the collateral is a legal term that basically means selling the collateral in an auction and applying the proceeds received from the sale to repay the loan. The proceeds received upon the sale of the collateral are given first to the secured creditor to satisfy their remaining obligation under the security agreement and cover any expenses associated with the disposal of the collateral. If there are remaining proceeds they are then distributed between those with remaining security interests or returned to the debtor. The debtor will not receive any proceeds from the sale unless all secured obligations that were owed to all secured creditors have been fully satisfied. A Notice of disposal of collateral under section 79 must be made in substantial conformity with Form IX not less than fourteen days before disposal of the collateral and sent to the debtor, any other person who has registered a financing statement in respect of the collateral and any other person that has given the secured creditor notice of an interest in the collateral.