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Limited Recourse Debt - Explained

What is Limited Recourse Debt?

Written by Jason Gordon

Updated at September 26th, 2021

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Table of Contents

What is a Limited Recourse Debt?Limited Recourse vs. Full Limited RecourseAcademic Research

What is a Limited Recourse Debt?

A limited recourse debt refers to a debt which a lender has limited claims if the borrower happens to default. Generally, it means that there is a legal claim against collateral posted to secure the loan, but the debtor cannot be held personally liable for the debt. 

Back To: COMMERCIAL LAW: CONTRACTS, PAYMENTS, SECURITY INTERESTS, & BANKRUPTCY

Limited Recourse vs. Full Limited Recourse

There are two forms of recourse debt; limited and full. With full recourse debt, a granter has the right to make a claim against the debtor. This could lead to the creditor seizing the borrower's assets, including those that a borrower acquired using the original loan. On the other hand, limited recourse debt sticks to the original loan contract. In other words, a lender can only seize those assets mentioned on the contract and nothing else. The lender has no right to seize any other asset a borrower possesses, especially if it was not part of the collateral.

Related Topics

  • What is a Security Interest?
  • Collateral 
  • Pledge as Collateral
  • Collateralize
  • Cross Collateralization
  • After-Acquired Collateral
  • Unsecured Loan Definition
  • Unencumbered Asset
  • What is a Secured Creditor?
  • Unsecured Creditor
  • What are the benefits of security interests for creditors?
  • Limited Recourse Debt
  • Uniform Commercial Code - Article 9

Academic Research on Limited Recourse Debt



limited recourse debt

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