Collateral

Property, real or personal that is offered to secure a loan, bond, mortgage, promise, or other credit and that becomes subject to seizure on default. It can also be called Security. In mortgage lending, the property itself serves as collateral for a mortgage loan. A creditor with rights in collateral is a secured creditor and has additional protections under the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim. Collateral is also important for companies that default on their debt. In such cases, hard assets such plant, property and equipment can be repossessed and liquidated.

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