Why Is the Unencumbered Status of Assets Considered to Be

question 67

Multiple Choice

Why is the unencumbered status of assets considered to be a distinguishing characteristic?

• A) They are typically worth more than the existing debt.
• B) They are typically acquired after giving a security interest.
• C) Lenders typically find them most attractive as security.
• D) Lenders typically find their portability to be a risk.

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Definitions:

Legal Risk

The potential for losses or damages resulting from legal proceedings, actions, or changes in law.

Vicarious Liability

A legal principle where one party is held liable for the actions of another party, such as an employer being responsible for the acts of its employees.

Strict Liability

A legal principle where responsibility for damages is assigned without the need to prove negligence or fault.

Duty of Care

A legal obligation imposed on an individual requiring adherence to a standard of reasonable care while performing any acts that could harm others.