Explain secured transactions

Question

Explain secured transactions?

Answer 1

A security interest allows a creditor to seize specified assets of the debtor (usually referred to as collateral) if a debt is not repaid. Secured creditors do not need to bring a court action to enforce these rights. In contrast, unsecured creditors have to go through court and obtain a judgment against the debtor and an execution order authorizing seizure and sale of certain of the debtor's assets. Although acquiring security minimizes risk to the creditor, it may alienate customers; it is also more expensive and complex to acquire security. Typical transactions that involve security interests include vehicle, appliance, and furniture purchases on payment terms, and a bank or private lender providing a line of credit to a business that does not own real property. Security interests are regulated provincially for the most part under Personal Property Security Act (PPSA) legislation. Banks that are incorporated federally also have the option of federal regulation of security interests pursuant to the Bank Act.