Which of the following represents an example of nonrecourse debt?

Nonrecourse debt refers to a type of loan where the lender's only recourse in case of default is to take the collateral securing the loan, rather than pursuing the borrower's personal assets. Therefore, if the borrower defaults, they are not personally liable beyond the collateral itself.

In the context of the options provided, the example that best fits the definition of nonrecourse debt is when a personal loan is structured in such a way that the borrower is not personally responsible for repayment. This means that if the borrower fails to repay the loan, the lender cannot take any of the borrower's personal assets; they can only claim the specified collateral if it exists. Thus, the nature of this type of loan aligns directly with the characteristics of nonrecourse debt.

Understanding nonrecourse debt is important for distinguishing it from other forms of debt where personal liability is a factor, as in a home mortgage where the buyer is personally liable, or an automobile lease that typically requires consistent payments to avoid repossession. Business debts secured by collateral may involve personal liability depending on the terms of the agreement and thus do not automatically align with nonrecourse classifications.