What must a seller do if they are canceling a pre-need contract due to default?

When a seller is canceling a pre-need contract due to default, they are allowed to continue with the credit as non-guaranteed. This means that while the contract may not be fulfilled as originally agreed due to the default, the seller must still acknowledge the potential value of the pre-need arrangement. By treating it as non-guaranteed credit, it provides a possibility for the purchaser to receive some benefit or offset for any prepaid amounts, even if the original contract terms can no longer be honored.

This approach maintains some level of accountability for the seller while also being in compliance with regulations governing pre-need contracts, which often require sellers to deal with defaults in a fair manner. The other options do not reflect the standard practices typically acknowledged when cancelling these contracts due to default, as they would either overshoot the seller's obligations or not meet regulatory standards.