California · Commercial Code

COM §9205: (a) A security interest is not invalid or fraudulent against creditors solely because either of the following applies: (1) The debtor has the right or ability to do any of the following: (A) Use, comm

What this law says, in plain English

A security interest cannot be deemed invalid or fraudulent against creditors merely because the debtor has certain rights or abilities regarding the secured property or transaction.

Read the full statutory text

(a) A security interest is not invalid or fraudulent against creditors solely because either of the following applies: (1) The debtor has the right or ability to do any of the following: (A) Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods. (B) Collect, compromise, enforce, or otherwise deal with collateral. (C) Accept the return of collateral or make repossessions. (D) Use, commingle, or dispose of proceeds. (2) The secured party fails to require the debtor to account for proceeds or replace collateral. (b) This section does not relax the requirements of possession if attachment, perfection, or enforcement of a security interest depends upon possession of the collateral by the secured party.

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