When collateral is destroyed and a substitute value is recovered, the creditor must not collect the same secured value twice. The pledge’s original liability, the replacement asset and the underlying debt interact in determining the final account.
It is therefore wrong to infer that a 100,000 debt plus a 60,000 substitute automatically creates 160,000 of indebtedness. One must establish what the substitute replaces and how settlement affects the secured debt.
Opening interactive controls...
Avoiding double recovery after third-party destruction
Kitab al-Rahn: Manumission, Destruction and Liability for Injury
When collateral is destroyed and a substitute value is recovered, the creditor must not collect the same secured value twice. The pledge’s original liability, the replacement asset and the underlying debt interact in determining the final account.
It is therefore wrong to infer that a 100,000 debt plus a 60,000 substitute automatically creates 160,000 of indebtedness. One must establish what the substitute replaces and how settlement affects the secured debt.