Michigan Collections Manager License Practice Test

What term describes a person who can be considered a debtor by security agreement?

1. Liable

2. Bound

3. Obligated

4. Responsible

The correct answer is: Bound

The term that accurately describes a person who can be considered a debtor by security agreement is "bound." In the context of security agreements, a debtor is typically bound by the terms of the agreement to fulfill certain obligations, usually involving the repayment of a loan or the performance of certain duties. Security agreements are legal contracts that create a security interest in personal property, and they often involve a debtor granting the lender a right to the collateral specified within the agreement. The term "bound" reflects the legal duty or responsibility of the debtor to adhere to the stipulated terms of the security agreement. This binding nature establishes the relationship between the debtor and the creditor, where the debtor is obliged to comply with the contract's conditions regarding the secured debt. The other terms, while related to obligations, do not capture the specific legal relationship established by the security agreement as effectively as "bound." For example, "liable" and "responsible" denote accountability but do not necessarily imply the existence of a specific binding contract like a security agreement does. "Obligated" suggests a duty to fulfill but lacks the explicit connection to the binding nature of legal agreements. Therefore, "bound" is the most suitable term to describe a debtor within the context of a security agreement.