Gateway sold a big-screen TV and entertainment center to Iris for $2000 on credit. Iris signed a promissory note and gave Gateway a security interest in the TV and entertainment center. Gateway filed a financing statement in the appropriate public

office. When Iris defaulted on her monthly payments owing a balance of $1780, Gateway's attorney made arrangements to have the TV and entertainment center repossessed. The attorney then placed classified ads in the local newspaper to sell the goods. The attorney's fees are $300, the repo company charged $150, and the advertising costs are $50. (A) If Iris chooses to redeem the property, how much must she pay to Gateway to recover the property? (B) If Iris does not redeem and the TV and entertainment center are sold for $1750, how will the money be disbursed?

(A) Up to the time that the secured party disposes of the collateral, the debtor has the right to redeem it. This means that the debtor can regain possession of the collateral if she pays the full balance of the note plus any expenses incurred by the secured party up to the time of the debtor's redemption. Here, if Iris wants to redeem the TV, she will need to pay Gateway $2280 ($1780 + $300 + $150 + $50 = $2280.) In most states, attorney's fees are included if the note or security agreement provides for this.

(B) If Iris does not redeem and the TV and entertainment center sell for $1750, the sale proceeds will be distributed as follows:

Sale Proceeds $1750.00
- Attorney's Fees $300.00
- Repo Co. $150.00
- Advertising $50.00

Balance $1250.00 to be applied to the loan balance of $1780.

This leaves a deficiency balance of $530 . Gateway can sue Iris to obtain a general unsecured judgment for this deficiency balance.