Debtor’s Financial Credibility and Seizable Assets
Debtor’s Financial Credibility and Seizable Assets
- It is an important matter for the creditor to know the actual value of the debtor’s asset, because the creditor should collect the debt by way of proceeding to seize, and liquidate the asset for enforcement if the debtor is in default.
- Subject to its nature, the right to collect debt may be exercised by seizing the debtor’s assets. In such circumstance, the subject matter to be seized is called “Seizable Assets.”
Purpose of Security Agreement
Purpose of Security Agreement
- The Purpose of a “Security Agreement” is to provide security for the loan or to guarantee repayment under the law.
- Security Agreements are classified into two categories: Personal Security Agreements and Property Security Agreements.
· A “Personal Security Agreement” means an agreement to secure repayment of loan by way of adding a third party’s property to “Seizable Assets.”
※ Personal Security Agreements are classified into two categories: Surety Agreements and Joint Debt Agreements. (Articles 428 and 413 of the Civil Act)
· A “Property Security Agreement” means an agreement to secure repayment of loan by way of securing or assigning movables or immovables owned by the debtor or a third party.
※ A Property Security Agreement may establish rights such as lien, pledge, or mortgage under the Civil Act.
Entering into Security Agreement
Entering into Security Agreement
- Considering the debtor’s financial credibility, the creditor may require him or her to enter into a Property Security Agreement or a Personal Guarantee Agreement.
- A Security Agreement may be concluded with reference to an Agreement for Consumer Cash Loan, but the former shall be separate and independent from the latter.
· The debtor is not necessarily obliged to provide security. Accordingly, not only the debtor but also any third party may be a party to a Security Agreement.