Lena borrows from Mac and Nicol,using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is
A)Lena.
B)Mac and Nicol,in proportion to Lena's debt to each.
C)Mac only.
D)Nicol only.

Question

Quizplus · Accepted Answer

Nicol has a perfected security interest, which means that they have priority over Mac in the event of a default by Lena. Therefore, Nicol would have the first rights to the collateral. Mac would have the right to any proceeds from the sale of the collateral in proportion to Lena's debt to them, but they would not have the first rights to it. Lena, as the borrower, does not have any rights to the collateral once she defaults on the loans.

Lena Borrows from Mac and Nicol,using the Same Collateral for Both