What is a recovery agreement?

• A. Court order to repossess
• B. Insurance agreement for collateral
• C. Agreement to waive debt
• D. An agreement between lessor and vendor to liquidate asset for maximum value

Answer: (D)

A recovery agreement is a formal plan for getting the most value back from collateral when a loan or lease is in default. It’s typically an arrangement between the lender (lessor) and a vendor or remarketing partner to liquidate the asset in a way that maximizes the recovery amount. This agreement outlines who handles the sale, how the asset will be sold (auction, direct sale, etc.), the timing, and how any proceeds will be allocated. It isn’t about a court order to repossess, an insurance contract for the collateral, or simply waiving the debt. It’s specifically about preserving value through controlled liquidation.