SIE EXAM ASKS QUESTIONS ABOUT LIQUIDATION PRIORITY - MAKE SURE THAT YOU UNDERSTAND WHAT A SECURED LOAN IS AND ITS PRIORITY IN BANKRUPTCY
In the FINRA Content Outline for the Securities Industry Essentials Exam (SIE), FINRA lists knowledge required of candidates about the order of liquidation if a person or a corporation goes into bankruptcy. See Content Outline 2.1.1. Bob Eder discusses liquidation priority in his Study for the SIE Exam on page 40 and 41. There is a big difference in the treatment of loans which are secured by some asset and loans which are unsecured. If a debtor goes into bankruptcy, it is very possible that unsecured creditors will not be paid back. However, with secured loans, the creditor almost always has the right to seize the asset securing the loan and avoid a loss. The creditor can sell the asset and keep the proceeds. What are some examples of secured loans? For our principal example, mortgage loans. Most homeowners owe monies that they borrowed from a bank or other financial institution to purchase their house. These loans are referred to as mortgage loans. They normally are fully secured b