Pertains to the loan where the Borrower has pledged some asset as collateral for the loan, which then becomes secured debt. The collateral is a secondary source of repayment if the Issuer/Borrower is unable to repay Investors/Lenders. For secured debt to be adequately protected, a secured interest must be “attached” against the borrower and “perfected” against third parties for secured debt to be adequately protected. Pertains to debt
and real estate investments.
A secured interest attaches against a borrower when a document is signed by the borrower specifically describing the collateral.
Perfection — A secured interest is “perfected” against third parties when such third parties are reasonably put on notice. While filing a lien/financing statement is the safest way of perfecting a secured interest, other methods are also available.
A “Purchase Money Secured Interest” is a special form of secured debt that is secured by the specific assets financed by such secured debt and will, if properly perfected, have a “super-priority” in bankruptcy. Pertains to real estate and debt.« Back to Glossary Index