LAW 603 Chapter Notes - Chapter 23: Distraint, Secured Creditor, Consumer Protection
15 Apr 2018
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Document Summary
There is two main ways to manage the risk: (1) security interests (2) guarantees: security interest allows a creditor to seize some of debtor"s personal property if the debt is not repaid. Example: you want to borrow money from the bank to buy a truck. The bank decides to lend you the money only on your ability to repay such a big amount. If examining your income, the bank has concerns. Then the bank will give loan if permission is to seize the truck if you don"t pay. This is called collateral a property that is subject to a security interest: guarantee a contractual promise by a third party to satisfy the principal debtor"s obligation if the debtor fails to do so. Example: you want to borrow the money from bank and persuade your friend to act as the guarantor of the loan. If you fail to pay, then the bank can demand the payment from your friend.
