Dave's Hardware store defaults on a debt to Equity Bank, which takes possession of the collateral securing the debt. The bank sells the collateral. The proceeds from the sale are applied first to
A) the balance of Dave's debt to the bank.
B) Dave's debts to other creditors.
C) the bank's expenses for the sale.
D) the minimum amount Dave's needs to stay in business.

Question

Dave's Hardware store defaults on a debt to Equity Bank, which takes possession of the collateral securing the debt. The bank sells the collateral. The proceeds from the sale are applied first to​
A) ​the balance of Dave's debt to the bank.
B) ​Dave's debts to other creditors.
C) ​the bank's expenses for the sale.
D) ​the minimum amount Dave's needs to stay in business.

Quizplus · Accepted Answer

The proceeds from the sale of collateral are first applied to cover the bank's expenses for the sale, such as costs related to repossession, storage, and selling the collateral.

Dave's Hardware Store Defaults on a Debt to Equity Bank