LAW 603 Lecture Notes - Lecture 8: Unsecured Creditor, Consumer Protection, Security Interest

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Creditor: agrees to accept payment in future (e. g. furniture store, bank, supplier, Guarantor: third party agrees to satisfy the principal debtor"s obligation if the debtor fails to do so. To alleviate risk of non-payment by debtor, creditor can obtain: Security interest: right to seize and sell collateral: collateral: debtor"s asset(s) that creditor can seize and sell, secured party: creditor that has a security interest. Guarantee: third party"s promise to repay debt: guarantor must pay creditor if debtor does not. By transferring possession to creditor ( pawn or pledge ) Item sold by creditor if debt not repaid. Limited use in business, since the business often needs the asset/collateral for its operations. By contract no transfer of possession: debtor keeps possession of the property. Creditor can take possession of property if debt not paid. Chattel mortgage: debtor transfers title in collateral to secured party. Creditor seizes asset (e. g. truck) if debt not repaid.

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