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(810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
Sec. 9-207. Rights and duties of secured party having possession or
control
of collateral.
(a) Duty of care when secured party in possession. Except as otherwise
provided in subsection (d), a secured party shall use reasonable care in the
custody
and preservation of collateral in the secured party's possession. In the case
of
chattel paper or an instrument, reasonable care includes taking necessary steps
to
preserve rights against prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured party in
possession. Except as otherwise provided in subsection (d), if a secured party
has
possession of collateral:
(1) reasonable expenses, including the cost of |
| insurance and payment of taxes or other charges, incurred in the custody, preservation, use, or operation of the collateral are chargeable to the debtor and are secured by the collateral;
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(2) the risk of accidental loss or damage is on the
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| debtor to the extent of a deficiency in any effective insurance coverage;
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(3) the secured party shall keep the collateral
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| identifiable, but fungible collateral may be commingled; and
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(4) the secured party may use or operate the
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(A) for the purpose of preserving the collateral
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(B) as permitted by an order of a court having
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| competent jurisdiction; or
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(C) except in the case of consumer goods, in the
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| manner and to the extent agreed by the debtor.
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(c) Duties and rights when secured party in possession or control.
Except as otherwise provided in subsection (d), a secured party having possession
of collateral or control of collateral under Section 7-106, 9-104, 9-105, 9-106, or 9-107:
(1) may hold as additional security any proceeds,
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| except money or funds, received from the collateral;
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(2) shall apply money or funds received from the
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| collateral to reduce the secured obligation, unless remitted to the debtor; and
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(3) may create a security interest in the collateral.
(d) Buyer of certain rights to payment. If the secured party is a buyer of
accounts, chattel paper, payment intangibles, or promissory notes or a
consignor:
(1) subsection (a) does not apply unless the secured
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| party is entitled under an agreement:
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(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse against
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| the debtor or a secondary obligor based on the nonpayment or other default of an account debtor or other obligor on the collateral; and
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(2) subsections (b) and (c) do not apply.
(Source: P.A. 95-895, eff. 1-1-09.)
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