Which statement is correct regarding a secured party's interest in proceeds when a debtor sells collateral?

A) A secured party automatically has an interest in proceeds.
B) A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party.
C) A secured party has an interest in proceeds only if a financing statement is filed on the proceeds.
D) A secured party has an interest in proceeds only if the secured party has a signed statement from the debtor granting an interest in proceeds.
E) The secured party may not acquire a security interest in proceeds.

Question

Lindsay Gilbert · Accepted Answer

Final Answer : A, Explanation :  Under the Uniform Commercial Code (UCC), a secured party automatically has a security interest in the proceeds of collateral upon its sale or disposition by the debtor. This ensures the secured party's interest is protected even after the original collateral is transformed or sold.

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