Legal Question in Credit and Debt Law in Virginia

Re: Refusal of collateral

A creditor in Va. is not required to elect remedies. He can sue or foreclose on the collateral, or both, but is only entitled to one recovery.

Re: Refusal of collateral

Of course, even though the value of the collateral is greater than the amount owed on it, that is not the same as cash. There is still a lot of WORK and risk involved in trying to sell the collateral, and uncertainty in how much it will actually sell for. Especially in a hurry, one can never be sure.

So I think that a creditor has a right to cash in preference to "stuff" other than cash. If you cannot pay or are behind, he then has a right to the collateral.

However, if you simply don't pay he will then be entitled to the collateral although you will be technically in default. So the result is the same as what you describe. (NOTE: He cannot bring a lawsuit if the point is "moot." He cannot ask in court for what you have already agreed to give him. The case is "moot." If you get to that point, ask me about that separately.)

However, there is something called "MITIGATION OF DAMAGES" which lenders, landlords, and businesses routinely ignore. If you offer him the collateral, and he refuses, and then he loses money, HE CANNOT CLAIM ANY LOSSES that he would not have had had he accepted your offer.

This is an obligation to minimize losses by acting in a commercially reasonable way. A person cannot drive up the losses, and then charge you with the extra amount. (Example: I break your window with a baseball. You leave the window unprotected for 2 weeks while it rains. I have to pay you for the broken window. I DO NOT have to pay you for the rain damage through the window. You had a duty to cover up the window with plastic.)

SO if the collateral is worth $X today, adn later on he gets less than $X some other way, you can raise a defense that he "failed to mitigate the damages." So he cannot sue you for the difference.

To do this, you must document (a) how much the collateral is worth today, in case it goes down in value, and (b) that you made the offer IN WRITING.

If I were you, I would place the collateral up for sale. Then tell him you have a buyer, if he will agree to release the collateral simultaneously with getting paid from the buyer. In that way, he cannot object later that he lost any money.

NOTE: Does this involve a home or real estate? You might want to see if the mortgage is legally defective and unenforceable by going to Mortgage Fraud Examiners (com)