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.
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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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.