Simple Definition – Upon default of a secured loan, the secured creditor is
entitled to seize, and then sell, the collateral to discharge the
debt that the security interest secures.
When a debtor defaults a secured creditor can take possession of the collateral without a court order and either retain or resell the collateral?
on the debtor’s default, a secured party can take possession (peacefully or by the court order) of the collateral covered by the security agreement. This provision, because it occurs without the use of the judicial process, is often referred to as the “
self-help”
provision of article 9.
Which of the following is an option for the secured creditor when the debtor defaults?
Which of the following is an option for the secured creditor when the debtor defaults?
Forget the collateral, and sue the debtor on his note or promise to pay.
When the creditor becomes the secured party who has a security interest in the collateral?
Perfected vs. Unperfected Security Interests: When one secured party has a perfected security interest in collateral and another secured party has an unperfected security interest in the same collateral,
the perfected interest prevails
.
What is debt secured by property?
A creditor whose debt is “secured”
has a legal right to take the property as full or partial satisfaction of the debt
. For example, most homes are burdened by a “secured debt”. This means that the lender has the right to take the home if the borrower fails to make payments on the loan.
Can I sell my house if it is collateral?
Yes you can do this
, however there are a lot of logistics that need to be worked out prior to simply selling your home. Also, if the loan payments have been timely forthcoming and the lender agrees to it there may be a possibility you could sell your…
When can a secured creditor repossess collateral?
When a borrower applies for a loan, most lenders require the borrower to pledge an asset as security for the repayment of the loan, i.e. collateral.
In the event the borrower defaults, usually by failing to make loan payments
, a secured creditor has a right to take possession of the collateral. § 679.609, Fla.
What is a secured creditor example?
A secured creditor may be the holder of
a real estate mortgage
, a bank with a lien on all assets, a receivables lender, an equipment lender, or the holder of a statutory lien, among other types of entities.
What is the difference between a secured and unsecured creditor?
Secured creditors often
require collateral
in the event the borrower defaults. Usually, bankruptcy is the only option for unsecured creditors if the borrower defaults. Unsecured creditors can range from credit card companies to doctor’s offices.
How does one become a secured creditor?
In order to become a secured party, one must (i)
prepare a document which grants a security interest (which is the agreement between the parties)
and (ii) also perfect on that security interest (which is the notice to the world of the security interest). Without both steps occurring, the lender will be unsecured.
What three things do you need to have a properly perfected secured creditor?
The three requirements of:
giving value, debtor rights in the collateral, and an authenticated security agreement
apply to the most common types of collateral, such as equipment, inventory and even payments due under a contract.
What is Article 9 of the UCC?
Article 9 is a
section under the UCC governing secured transactions including the creation and enforcement of debts
. Article 9 spells out the procedure for settling debts, including various types of collateralized loans and bonds.
Are proceeds automatically perfected?
Like current law, if the security interest in the original collateral was perfected, then the proceeds security interest
is automatically perfected for a short period of time
, giving the creditor an opportunity to take the steps necessary in order to maintain perfection.
How do you know if debt is secured?
To tell if debt is secured, consider
whether there’s any items of value guaranteeing the loan
. For example, some common types of secured debt include: Mortgages, which are secured by the home. The house is the collateral and the lender can foreclose and sell it if you don’t pay.
When property is used to secure payment of a debt or obligation?
A security interest
is an interest in property—real estate or otherwise—that secures repayment of a debt or performance of some other obligation.
Can collateral be used as a down payment?
A: In principle, any collateral acceptable to the lender could serve as a substitute for a down payment. The only such substitute found in the U.S. is
securities
, which must be posted as collateral with an investment bank that also makes mortgage loans.
