Wis. Stat. § 409.205

Current through Acts 2023-2024, ch. 272

Section 409.205 - 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:

(a) 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

(b) The secured party fails to require the debtor to account for proceeds or replace collateral.

(2) REQUIREMENTS OF POSSESSION NOT RELAXED. 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.

Wis. Stat. § 409.205

2001 a. 10.

The above annotated materials cite to the pre-2001 Wis. Act 10 version of s. 409.205.

Under this section the debtor is freed from strict accountability to the secured creditor for the property secured, and the validity of a secured interest in after-acquired property is specifically recognized. When a creditor has a security interest in the debtor's after-acquired property the debtor is able to commingle his property and use it to his or her best interest. The acquiescence of the secured creditor under an after-acquired clause by the debtor does not invalidate the security interest of the creditor. Burlington National Bank v. Strauss, 50 Wis. 2d 270, 184 N.W.2d 122 (1971).