Right to Setoff

Has the Revised Article 9 changed "right to setoff"? I.E., all of our loan documents state we have the right to setoff against deposit accounts in the event of default. On several occassions, we have used funds in a checking account to offset payment(s) due.

I don't believe the UCC changes effected setoff as that is a contractual issue.

I thought setoff is a common law issue. How does the UCC apply if you don't mention setoff in your note?

I am not a lawyer so I can't provide a legal answer except to say that it is likely in both your note form and your signature card/deposit agreement. I don't think it has to be in both but it never hurts.

Ok, I have a setoff question. I have a farmer that has died. She had enough money in her checking account to pay her note off and the note has "standard setoff language" in it. The checking account has a hold on it due to "Death on the Account". I know there are lime and fertilize bills outstanding. There has been no Administrator appointed and it may be several months until someone actually is appointed. (She died without a will.) Can I exercise my right of setoff and pay my loan out?

You will have to look at your state's probate code. It is possible that you have first claim to the funds for your debts. If this is the case, I would believe you should have the account appropriately flagged so that you are in line first when an Administrator is appointed, or setoff and be prepared to un-do the transaction if necessary. You wouldn't have much to lose and unless this is a big amount and an IBA deposit, no harm will come to the estate.

If your state doesn't give you priority, see who you can light a fire under to get the estate settled.