After accounts are repossessed, can the account debtor assert defenses to payment?

When discussing whether account debtors can assert defenses to payment after accounts have been repossessed, the understanding lies in the relationships established by the Uniform Commercial Code (UCC), particularly in secured transactions.

Account debtors can indeed assert defenses to payment, but this is contingent upon certain conditions. Generally, an account debtor has the right to engage in any defenses that they would have had against the original debtor. For instance, if the original debtor had a valid defense against the obligation (like fraud or failure of consideration), the account debtor can assert that defense even after repossession occurs.

This scenario emphasizes that rights and defenses do not vanish simply because of the repossession. The verification of these defenses is crucial, as they must be specific and relevant to the transaction at hand.

In contrast, the other options mischaracterize the nature of the account debtor's rights post-repossession. The assertion that no defenses can be made or that they must pay the repossessing creditor oversimplifies and overlooks the nuances established under the UCC. Also, claiming that an account debtor can only address the original debtor ignores the broader implications of transactions involving repossession and the corresponding rights that remain available to the account debtor.

The correct understanding emphasizes that while