Asked by Nichole Stone on May 12, 2024
Verified
Seizure of collateral is one possible remedy for breach of covenant restrictions.
Seizure of Collateral
The act of a lender taking possession of the collateral pledged against a loan in the event of default by the borrower.
Breach of Covenant
The violation of a term or condition set in a contractual agreement or bond covenant.
- Comprehend the processes involved in renegotiating and enforcing debt covenants after a default occurs.
Verified Answer
TL
TUYEN LE NGUYEN LANMay 15, 2024
Final Answer :
True
Explanation :
Seizure of collateral is a common remedy for breach of covenant restrictions, where the lender can take possession of the collateral pledged by the borrower as security for the loan. This is usually specified in the loan agreement and can be a highly effective way for the lender to recover their losses in case of default by the borrower.
Learning Objectives
- Comprehend the processes involved in renegotiating and enforcing debt covenants after a default occurs.