Section 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;

(2) the risk of accidental loss or damage is on the debtor to the

extent of a deficiency in any effective insurance coverage;

(3) the secured party shall keep the collateral identifiable, but

fungible collateral may be commingled; and

(4) the secured party may use or operate the collateral:

(A) for the purpose of preserving the collateral or its

value;

(B) as permitted by an order of a court having competent

jurisdiction; or

(C) except in the case of consumer goods, in the manner and

to the extent agreed by the debtor.

(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, except money or

funds, received from the collateral;

(2) shall apply money or funds received from the collateral to

reduce the secured obligation, unless remitted to the debtor;

and

(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 party is

entitled under an agreement:

(A) to charge back uncollected collateral; or

(B) otherwise to full or limited recourse against the debtor

or a secondary obligor based on the nonpayment or other

default of an account debtor or other obligor on the

collateral; and

(2) subsections (b) and (c) do not apply.