Legal Definitions - hypothecary debt

Definition:Hypothecary debt is a type of debt that is secured by a lien on an estate. It means that if the debtor fails to pay back the debt, the creditor has the right to take possession of the estate and sell it to recover the debt.

Example: A person takes out a mortgage to buy a house. The mortgage is a hypothecary debt because the lender has a lien on the house. If the borrower fails to make the mortgage payments, the lender can foreclose on the house and sell it to recover the debt.

This example illustrates how hypothecary debt works. The lender has a security interest in the property, which gives them the right to take possession of it if the borrower defaults on the loan. This type of debt is common in real estate transactions, where the property serves as collateral for the loan.