Secured Transaction Law: an overview
A security interest arises when, in exchange for a loan, a borrower agrees in a security agreement that the lender (the secured party) may take specified collateral owned by the borrower if he or she should default on the loan. A security interest also provides the secured party with the assurance that if the debtor bankrupts, he or she may be able to recover the value of the loan by taking possession of specified collateral instead of receiving only a portion of the borrower's property after it is divided among all creditors. See Bankruptcy.
