HRS §490:9-617
What happens to the collateral when a lender sells it after default
When a lender sells collateral after a borrower defaults, the buyer gets the borrower's rights and the lender's claim is wiped out, along with any lower-priority claims. If the buyer acts honestly, they keep the collateral free of those claims even if the lender made a mistake. If not, the buyer takes it subject to those claims.
borrowerslandlords
The statute, as written — Rights of transferee of collateral
(a) A secured party's disposition of collateral after default: (1) Transfers to a transferee for value all of the debtor's rights in the collateral; (2) Discharges the security interest under which the disposition is made; and (3) Discharges any subordinate security interest or other subordinate lien. (b) A transferee that acts in good faith takes free of the rights and interests described in subsection (a), even if the secured party fails to comply with this article or the requirements of any judicial proceeding. (c) If a transferee does not take free of the rights and interests described in subsection (a), the transferee takes the collateral subject to: (1) The debtor's rights in the collateral; (2) The security interest or agricultural lien under which the disposition is made; and (3) Any other security interest or other lien.
LawTrove is not legal advice. The summary above is a computer-generated restatement — the authoritative text is the official version linked above.