What is the Debtor's responsibility to aggregate cash, notes, chattel paper, or other property from sales of Collateral for 1-800-GOT-JUNK??
1_800_Got_Junk Franchise · 2025 FDDAnswer from 2025 FDD Document
3.1
The Debtor shall have no right to sell, lease or dispose of any of the Collateral except for a sale in the
ordinary course of business upon customary sales terms for value received and then only upon the express
condition that on or before delivery to a third party the Debtor shall secure full settlement of the entire purchase
price for the Collateral so sold in cash, notes, chattel paper or other property in form satisfactory to the Secured
Party.
Until the Debtor shall have made settlement with the Secured Party of the full amount due to the
Secured Party with respect to all such Collateral sold or disposed of by the Debtor, the Debtor shall aggregate
such cash, notes, chattel paper or other property and hold the same in trust for the Secured Party and the
Secured Party shall have a security interest therein.
The Debtor shall be entitled to transfer such notes or
chattel paper free of such trust if at or prior to the time of such transfer the payment due from the Debtor to
the Secured Party shall be assured to the satisfaction of the Secured Party.
Source: Item 22 — Contracts (FDD page 24)
What This Means (2025 FDD)
According to the 2025 FDD, regarding the General Security Agreement between 1-800-GOT-JUNK? and the franchisee (Debtor), the Debtor is permitted to sell or dispose of collateral in the ordinary course of business, provided it's done with customary sales terms for value received. However, this is contingent upon securing full settlement of the purchase price in a form acceptable to 1-800-GOT-JUNK?.
Until the Debtor makes a full settlement with 1-800-GOT-JUNK? for all collateral sold or disposed of, they are required to aggregate all proceeds. This includes cash, notes, chattel paper, or other property received from the sale. The Debtor must hold these aggregated proceeds in trust for 1-800-GOT-JUNK?, which maintains a security interest in them.
The Debtor can transfer notes or chattel paper free of this trust, but only if the payment due to 1-800-GOT-JUNK? is assured to the satisfaction of 1-800-GOT-JUNK? at or before the transfer. This provision ensures that 1-800-GOT-JUNK?'s security interest is protected while allowing the franchisee to conduct sales in the ordinary course of business, subject to specific conditions and controls.