Atlas Vehicle Loans Ltd.has a valid security interest in a truck owned by one of its clients.The client is now in default under the loan agreement and owes $24 000 to Atlas.Atlas has determined the truck will likely only sell for $19 000 on the second hand market.Will Atlas be able to recover this deficiency from the debtor?

Question

Quizplus · Accepted Answer

Atlas can recover the deficiency from the debtor but only as an unsecured creditor for the amount that exceeds the value of the collateral (the truck). Once the collateral is sold, any remaining debt becomes unsecured since the secured asset no longer exists to back it.