Protect against default with Secured Transactions.
WHAT TO EXPECT
As someone in business, you know there are going to be transactions that are substantial enough to deserve collateral as security to protect against default. That’s the role of secured transactions. If you’re the creditor in a transaction, you don’t want to be on the hook for a huge sum of money without any way to protect yourself. By having a security interest to act upon, you can more quickly and easily recover the money you’re owed than you could with an unsecured transaction and business litigation.
SETTING UP A SECURED TRANSACTION:
Your goal with a secured transaction is to have the debtor offer an asset as security interest or collateral that can cover the outstanding debt. This asset should ideally be something that’s not likely to depreciate over time. To set up the terms of a secured transaction, you and the other party delineate them in a security agreement that gives you the right to foreclose upon a property or repossess something of value. The most common assets used as collateral include real estate, cars, stock, and jewelry. It’s up to you to decide whether something will retain its value well enough to work as collateral and help you avoid collections and assets recovery later on.
REASON TO USE A SECURED TRANSACTION:
Why bother with secured transactions when you can just sue the debtor instead? The main reason is that lawsuits are expensive and it’s much easier to get back the money you’re owed with a secured transaction. It’s also important to recognize that if a debtor goes bankrupt or loses the property in question, a secured creditor like you will take precedent over unsecured creditors. This is important, because it could mean the difference between getting your money back and getting nothing, and it makes it easier to skip pricey business litigation or drawn-out collections and assets recovery.
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