Asked by Deina Pavon on Jul 26, 2024
Verified
Which of the following is true in regards to a dispute when two parties have given a loan over collateral?
A) The party with the secured interest will have priority in repossessing the collateral over the party with the unsecured interest.
B) Both parties will be able to claim an interest in the collateral and a court will allocate the percentage owed to both.
C) The first to file a lawsuit is the one who receives the collateral.
D) The first to physically reposse the collateral will be the winning party.
E) The banks will assess allocation between themselves based on who was the first to secure the loan on the collateral.
Secured Interest
A property interest created by agreement or by law over assets to secure the performance of an obligation, usually the payment of a debt.
Collateral
Assets pledged by a borrower to secure a loan or credit, which can be seized by the lender if the borrower fails to repay according to the agreed terms.
Repossessing
Repossessing refers to the process of a lender taking back possession of property (typically collateral) when the borrower fails to make required payments.
- Understand priority rules in disputes involving multiple secured parties.
Verified Answer
KA
keliza alvarezAug 01, 2024
Final Answer :
A
Explanation :
The party with a secured interest in the collateral typically has priority over parties with unsecured interests in the event of a default. This is because secured creditors have a legal claim to the specific collateral that secures the loan, whereas unsecured creditors do not.
Learning Objectives
- Understand priority rules in disputes involving multiple secured parties.