A purchase-money security interest is formed ________
A) when a debtor uses a credit card to buy collateral
B) when a bank attaches a debtor's account to the collateral
C) when a second debtor buys the collateral
D) when a debtor uses borrowed money from the secured party to buy the collateral.
E) when parties stipulate in a contract that they want a purchase-money security interest

Question

Quizplus · Accepted Answer

A purchase-money security interest (PMSI) is specifically formed when a debtor uses borrowed money from the secured party to buy the collateral. This arrangement gives the lender (secured party) a priority claim on the collateral if the debtor defaults.

A Purchase-Money Security Interest Is Formed ________