Also known as: tracing principles · tracing
Written by attorneys · grounded in primary & secondary sources — see below
A method permitted under non-UCC law for identifying the portion of proceeds that have been commingled with other funds, allowing a secured party to maintain its interest in the traceable amount.
Threshold Capital held a perfected security interest in inventory sold by its debtor. The debtor deposited the sale proceeds into a general operating account that already contained other funds. When the debtor defaulted, Threshold Capital identified its share of the account balance by applying equitable tracing methods permitted under non-UCC law. The court treated the traced amount as identifiable proceeds subject to the security interest.
A secured party held an interest in equipment sold by its debtor. The debtor deposited the sale proceeds into a general operating account that already contained other funds. When the debtor defaulted, the secured party identified its share of the account balance by applying equitable tracing methods permitted under non-UCC law. The court treated the traced amount as identifiable proceeds subject to the security interest.
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A secured party held an interest in collateral sold by its debtor. The debtor deposited the sale proceeds into a general operating account that already contained other funds. When the debtor defaulted, the secured party identified its share of the account balance by applying equitable tracing methods permitted under non-UCC law. The court treated the traced amount as identifiable proceeds subject to the security interest.
A secured party held an interest in assets sold by its debtor. The debtor deposited the sale proceeds into a general operating account that already contained other funds. When the debtor defaulted, the secured party identified its share of the account balance by applying equitable tracing methods permitted under non-UCC law. The court treated the traced amount as identifiable proceeds subject to the security interest.
UCC § 9-315 permits a secured party to identify proceeds by any tracing method allowed under other law when funds are commingled. The principle treats the traced amount as still subject to the security interest even after deposit into a general account.
Bank records and account statements showing the movement of funds are typically sufficient. The secured party must demonstrate the chain from original collateral through any commingling to the current balance.
No. Commingling does not destroy the interest if the secured party can identify its portion using permitted equitable tracing methods under non-UCC law. Failure to maintain records often results in loss of the interest in the commingled funds.
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