For most collateral, possession by a secured party is impractical because it denies the debtor the right to use or derive income from the property to pay the debt.

Question

Quizplus · Accepted Answer

Most collateral, such as equipment or inventory, is used by the debtor in their business operations to generate income, which in turn is used to pay off the debt. Taking possession of such collateral would hinder the debtor's ability to operate their business and repay the loan.

For Most Collateral, Possession by a Secured Party Is Impractical