Video: Property as Collateral

In this lesson, delve into the world of secured transactions as Nick Palazzolo, CPA, unravels how property can function as collateral. Explore the rights and protections offered to both creditors and debtors when assets such as real estate, personal property, accounts receivable, and even intellectual property are pledged in securing a loan. With Nick's guidance, understand the nuances of using various types of property as collateral, from executing mortgages for real property to perfecting security interests in personal property by filing financing statements. He also explains the dynamics of accounts receivable financing and the steps required to use intellectual property as collateral, ensuring those handling such transactions are well-prepared to secure or provide financing through these means.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Property is collateral in secured transactions. Property can serve as collateral, which we've seen time and time again, which is an asset pledged by a borrower known as the debtor to a lender known as the creditor to secure the repayment of a loan or other obligation. If the borrower fails to fulfill their payment obligations, the creditor has the right to seize and sell the collateral to recover the outstanding debt. This arrangement reduces the risk for the creditor and allows the borrower to access financing that might not have been available otherwise. All right, talking about the specific types of property, talked about seizing it, the types of perfection over the different types. Let's actually go through the various types. So we've got real property, such as land or buildings. This can be used as collateral in secured transactions. In these cases, we've got a mortgage or a deed of trust is typically executed, which creates a lien on the property in favor of the creditor. If the borrower defaults on the loan, the creditor can initiate foreclosure proceedings to take possession of the property and sell it to recover the debt. For personal property, such as vehicles, equipment, or inventory, this can also be used as collateral in secured transactions. To create a security interest in personal property, the parties typically enter into a security agreement, which describes the collateral and the terms of the loan. The creditor may also need to perfect their security interest by filing a financing statement with the appropriate public office. And this step puts third parties on notice of the creditor's claims and establishes priority among competing claims. For AR, businesses may actually use also their AR, which is money owed by customers as collateral in secured transactions. This type of

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Bankruptcy, Debtors & Creditors, and Secured Transactions

Module: 3 Concepts, 46 Videos

Secured Transactions, Including the Rights, Duties and Liabilities of Debtors, Creditors and Guarantors Overview

2:55

Introduction to Secured Transactions

5:24

Debtors, Creditors, and Guarantors

3:10

Surety vs. Guarantor