Application of payments

Application of payments

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What does Application of payments mean in American Law?

The definition of Application of payments in the law of the United States, as defined by the lexicographer Arthur Leff in his legal dictionary is:

The process by which payments received are apportioned to different purposes, especially to debts or to component parts of a single debt. For example, it is provided by U.C.C. § 9-504 that a secured party may, after default, sell or otherwise dispose of collateral and that the “proceeds of disposition shall be applied in the order following to [a list of things to be paid off].” Payments on a typical mortgage are applied first to accrued interest and then to the principal outstanding.


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