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Simple English definitions for legal terms
evidence of indebtedness
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A quick definition of evidence of indebtedness:
Evidence of indebtedness is a document that shows someone owes money to another person or organization. It is like a promise to pay back the money with interest. This document is also called a security, which is something that is given as a guarantee that the debt will be repaid. Securities can be in the form of stocks, bonds, or other types of investments. They are different from regular things that people buy because they do not have their own value, but represent ownership or rights in something else.
A more thorough explanation:
Definition: Evidence of indebtedness is a type of security that represents a promise to pay back borrowed money with interest. It is collateral given or pledged to guarantee the fulfillment of an obligation.
For example, a bond is a type of evidence of indebtedness. When a company issues a bond, it is borrowing money from investors and promising to pay it back with interest. The bond serves as evidence of this debt and is a form of security for the investor.
Another example is a promissory note. This is a written promise to pay back a loan on a specific date with interest. The promissory note serves as evidence of the debt and is a form of security for the lender.
These examples illustrate how evidence of indebtedness is a type of security that represents a promise to pay back borrowed money with interest. It is important for investors and lenders to have this type of security to ensure that they will be repaid.