Definition - What does Hypothec mean?

Hypothec is a civil law term for a creditor's ability to seize a borrower's property in certain circumstances. This legal right to take the property that someone uses to secure a loan or similar transaction is exercised when the person (usually a borrower) fails to fulfill their financial obligations. It is granted through binding agreements or by rules that govern certain types of transactions.

Justipedia explains Hypothec

Hypothecs are common in many countries, and can generally be attached to any property used as collateral. However, the owner retains full possession, control and use of such property as long as they abide by the terms of a loan or similar contract.

In Canada, for example, a hypothec gives the creditor the right to: seize and manage the property, seize and sell the property, seize the property and dispose of it through a "court-approved" sale, or seize it for their own use. Canadian creditors cannot exercise these rights unless the borrower (debtor) fails to make schedule payments, or fails to repay the entire amount when the loan comes due, and if the value of the property is similar to the outstanding amount.

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