ExpertMedium1 markMultiple Choice
CPA · Question 17 · Area 2: Business Law
A surety pays a debt owed by the principal debtor to the creditor. Which right allows the surety to now 'step into the shoes' of the creditor and exercise the creditor's rights (such as enforcing a lien) against the debtor?
A surety pays a debt owed by the principal debtor to the creditor. Which right allows the surety to now 'step into the shoes' of the creditor and exercise the creditor's rights (such as enforcing a lien) against the debtor?
Answer options:
A.
Exoneration
B.
Contribution
C.
Subrogation
D.
Reimbursement
How to approach this question
Define the Surety Rights: Exoneration (Before payment), Subrogation (After payment - get creditor's rights), Reimbursement (After payment - get money back), Contribution (From co-sureties).
Full Answer
C.Subrogation✓ Correct
Subrogation allows the surety, after paying the principal's debt, to enforce any rights the creditor had against the principal, including security interests.
Common mistakes
Confusing reimbursement (getting paid back) with subrogation (getting the creditor's legal rights/liens).
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