Posted in Finance, Accounting and Economics Terms, Total Reads: 268
Definition: Blanket Lien
It is a type of blanket that is given to creditors to safeguard their interests against any default by debtors. Under blanket lien if a debtors defaults in paying back the loan, the creditors have a right to seize all kinds of assets and collaterals owned by the debtors.
The legal interest given to creditors in all the assets of the debtor acts as a safeguard against default by debtors. Hence blanket lien gives maximum protection to the lenders and minimum protection to the borrowers.
Remember it is different from lien, where creditor has a right over a single asset only! Unlike lien agreement on an automobile, which provides rights to the creditors to repossess the automobile in the event of non-payment by debtor, a blanket lien allows the creditor to choose any of the items, listed as a security interest for the loan, to be used to retire the debt. The debtor has no say in which item to choose.