What happens in cases where a debtor has paid 60% of the principal amount in secured loans?

In secured transactions, when a debtor has paid a significant portion of the principal amount—such as 60%—the law typically provides protections against strict foreclosure. Strict foreclosure refers to a process where the secured party takes possession of the collateral without judicial involvement and retains it in satisfaction of the debt. However, strict foreclosure is generally prohibited if the debtor has paid a considerable amount of the principal, as it is seen as inequitable to deny the debtor any equity they have built in the collateral.

In many jurisdictions, rules exist to protect debtors from harsh outcomes when they have made substantial payments. For example, laws may dictate that in order for a secured party to foreclose strictly, the debtor must have defaulted significantly, or they may need to have paid less than a certain percentage of the loan.

This approach emphasizes fairness and protects the interests of borrowers who have made serious efforts to repay their debts. As such, stating that the debtor cannot be strictly foreclosed is accurate based on the premise that they have paid a substantial amount of the principal and would therefore retain some rights in the collateral. This is an important principle in secured transactions intended to balance the interests of both creditors and debtors.