Effect of acceptance of collateral

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  • (a) Effect of acceptance. A secured party's acceptance of collateral in full or partial satisfaction of the obligation it secures:

    • (1) discharges the obligation to the extent consented to by the debtor;

    • (2) transfers to the secured party all of a debtor's rights in the collateral;

    • (3) discharges the security interest or agricultural lien that is the subject of the debtor's consent and any subordinate security interest or other subordinate lien; and

    • (4) terminates any other subordinate interest.

  • (b) Discharge of subordinate interest notwithstanding noncompliance. A subordinate interest is discharged or terminated under subsection (a), even if the secured party fails to comply with this article.


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