Use or Disposition of Collateral Permissible

1. Law
2. Georgia Code
3. Commercial Code
4. Secured Transactions
5. Effectiveness of Security Agreement; Attachment of Security Interest; Rights of Parties to Security Agreement
6. Use or Disposition of Collateral Permissible

1. When security interest not invalid or fraudulent. A security interest is not invalid or fraudulent against creditors solely because:
   1. The debtor has the right or ability to:
      1. Use, commingle, or dispose of all or part of the collateral, including returned or repossessed goods;
      2. Collect, compromise, enforce, or otherwise deal with collateral;
      3. Accept the return of collateral or make repossessions; or
      4. Use, commingle, or dispose of proceeds; or
   2. The secured party fails to require the debtor to account for proceeds or replace collateral.
2. Requirements of possession not relaxed. This Code 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.

(Code 1981, §11-9-205, enacted by Ga. L. 2001, p. 362, § 1.)

Law reviews.

- For article discussing the classification of a continuing security interest in changing collateral as an unenforceable preference under Section 60a of the Bankruptcy Act, see 1 Ga. L. Rev. 257 (1967). For article, "The Good Faith Purchase Idea and the Uniform Commercial Code," see 15 Ga. L. Rev. 605 (1981). For note examining the conflict between the floating lien in after-acquired property under the Uniform Commercial Code and the voidable preferences provisions of the Bankruptcy Act, see 9 Ga. L. Rev. 685 (1975).

JUDICIAL DECISIONS

Editor's notes.

- In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.

Floating liens on inventory.

- Floating liens against inventory, except insofar as security instrument itself may stipulate otherwise, are valid and debtor has no legal responsibility for keeping property or proceeds from sale sequestered. Sowards v. State, 137 Ga. App. 423, 224 S.E.2d 85 (1976) (decided under former Code Section11-9-205).

RESEARCH REFERENCES

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, § 510.

C.J.S.

- 37 C.J.S., Fraudulent Conveyances, § 159.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-205.

ALR.

- Necessity and sufficiency of notice or statement prescribed by factor's lien law, 96 A.L.R.2d 727.

Uniform Commercial Code: Burden of proof as to commercially reasonable disposition of collateral, 59 A.L.R.3d 369.

Uniform Commercial Code: failure of secured creditor to give required notice of disposition of collateral as bar to deficiency judgment, 59 A.L.R.3d 401.

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