What is a Certificate of Claim?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 11 November 2019
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The Certificate of Claim is essentially a document that establishes a specific covenant within the broader agreement between a lender and a borrower. Essentially, the certificate established a contingent promise on the part of the borrower to cover any and all expenses involved in a foreclosure on property or legal actions taken by the lender in the event that the loan goes into a default status. The Certificate of Claim ensures that the lender will eventually be able to recover his or her investment in the borrower, regardless of the circumstances.

It is not unusual for the Certificate of Claim to include specific information about how the final amount due to the lender is calculated. Generally, the lending transaction empowers the lender to seize control of collateral and other assets in the event that the borrower does not honor the payment schedule. This approach is often included in any loan arrangement that involved high value items, such as property, homes, or automobiles.

In the example of a loan used to purchase a home, the lender may chose foreclosure as the mechanism to sell the property and use the proceeds to cover both the outstanding debt and the costs associated with the foreclosure process. Should the revenue generated by the sale not cover all expenses incurred by the lender, he or she can still invoke the Certificate of Claim and require the former borrower to pay the remaining amount.


The inclusion of a Certificate of Claim in the loan agreement provides the lender with additional avenues of recourse to recover all costs associated foreclosures and defaults. Depending on the amount remaining after the collateral is seized and sold to settle the major share of the debt, the insured lender may or may not choose to claim additional funds under the Certificate of Claim. In some cases, it may be necessary to seek assistance from the legal system in order to garnish wages or gain control of additional assets in the possession of the borrower. If the remaining balance is relatively low, the lender may consider the effort to be more trouble than it is worth, and choose to use the write off the remainder as a business loss.


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