Collateral on a loan that the lender may not seize. The possibility of frozen collateral is a risk the lender takes when he/she accepts any collateral for a loan. Most of the time, collateral becomes frozen when there is a dispute as to whether the borrower owns it, or when two lenders disagree as to who has prior claim to it.
Collateral that the lender is unable to seize in order to satisfy repayment of a debt. For example, a lender may find that there is a legal question as to who actually owns the asset pledged as collateral.