True sale
Asset-Backed Securities glossary · Asset Backed Securities
Definition
A legal conclusion that a transfer of assets is a sale for bankruptcy purposes, such that the transferred assets are not reachable by the transferor's creditors.
True sale in plain English
When a company bundles up assets (like a stack of loans it's owed) and hands them to a separate entity in exchange for cash, the big legal question is: did it truly SELL them, or just borrow against them? A 'true sale' is a court-recognized conclusion that it was a real sale — meaning if the original company later goes bankrupt, its creditors can't grab those assets back, because they no longer belong to it. This matters enormously to investors, because it's the wall that keeps their assets safe from someone else's bankruptcy. It's like truly selling your car versus just using it as collateral: once it's genuinely sold, your own debts can't touch it anymore.
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