Question

What are the three options available to a secured creditor regarding the collateral if the debtor defaults?

Answer 1

If there is any default (means, the debtor is unable to pay), the creditor can do the following things:

1) Sell the collateral security in the market directly for recovering the loan amount.

2) Can go for auction and sell the collateral security to the bidder who gives the highest bid. In this case the remaining amount, after deducting for recovery, may be returned back to the debtor by the creditor.

3) The collateral can be kept by the creditor with him/her for personal use.