When a debt is secured by property as collateral and the debtor defaults,the creditor may:
A) take possession of the property and retain it in full satisfaction of the debt or sell it.
B) take possession of the property and use it until the debtor pays the debt.
C) not take possession of the property,but must sue the debtor for the balance due.
D) None of these.

Question

Quizplus · Accepted Answer

When a debt is secured by property as collateral and the debtor defaults, the creditor has the legal right to take possession of the property and sell it or retain it in full satisfaction of the debt, as per the terms agreed upon in the loan agreement or security agreement. This is known as 'foreclosure.' Therefore, option A is the best choice. Option B is incorrect because the creditor cannot use the property until the debt is paid, and option C is incorrect because the creditor does not necessarily have to sue the debtor for the balance due if they can recover the full amount from the sale of the property.

When a Debt Is Secured by Property as Collateral and the Debtor