A trustee does not need to administer collateral to secure a lien. By definition, a lien is secured because it states that the holder can claim the collateral if the associated debt is not paid. However, the debtor manages the property (often a car or house) that serves as collateral while paying down the debt.
Secured Debt
A secured debt is any debt that includes in the contract between lender and borrower the right for the lender to take property to cover the debt. The contract specifies what property (called the collateral) and under what circumstances the lender can take and sell it. The lender may keep the title or deed to the property until the debt is paid off, but the lender does not administrate or control the property.
Lien
A lien is a legal instrument that secures debt. The lender or other creditor can place a lien on the property by attaching the lien to the title of the collateral. The lien states the creditor, date created, service provided and the amount of money that the debtor must pay to remove the lien.
Trustees
Trustees are people designated by a court or legally binding contract to administer property in the interest of the owner when the owner does not want to or cannot. Trustees can handle property with liens attached and some property can pass through a trustee before being given to a lien holder, but property does not need to be administered by a trustee for a lien to be secure.
Liens in Bankruptcy
In bankruptcy, a person's assets become a bankruptcy estate, which a court trustee administers. Secured debt receives special protections in bankruptcy and the creditor is entitled to money equivalent to the market value of the property. The court trustee manages any asset sales and distribution of proceeds to creditors.
0 comments:
Post a Comment