Simple English definitions for legal terms
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Cross-collateralization is when someone uses more than one thing as security for a loan. For example, if you borrow money to buy a car and use your house as collateral too, that's cross-collateralization. It means that if you can't pay back the loan, the lender can take both your car and your house to pay off the debt.
Definition: Cross-collateralization is a type of security given by all parties to a contract. It is a form of collateral that protects a creditor's postpetition extension of credit and prepetition unsecured claims, which obtain priority over other creditors' prepetition unsecured claims.
Examples:
These examples illustrate how cross-collateralization works by using the same collateral to secure multiple loans or debts. This can be beneficial for creditors as it provides additional security for their loans, but it can also be risky for borrowers as it puts more of their assets at risk if they default on any of the loans.