§ 4-56-105 — Cross-collateralization clauses - Definition

(a) As used in this section, unless the context otherwise requires, "cross-collateralization clause" means a clause that by its terms grants a security interest established under a separate security agreement, instrument, mortgage, or deed of trust to secure debt or another obligation other than that for which it was specifically incurred, including without limitation a preexisting or subsequent debt or obligation. (b) A cross-collateralization clause that grants a security interest for a personal, family, household, or commercial purpose is valid and enforceable, whether or not the cross-collateralization clause is specific or general, lists or identifies existing debts or obligations, or secures debts incurred for the same purpose as the original debt. (c) A cross-collateralization clause is valid and enforceable if the cross-collateralization clause meets the requirements of this section. (d) A cross-collateralization clause in a security instrument that does not identify the preexisting debt, value, or obligation is not invalid if the cross-collateralization clause meets the requirements of this section. (e) (1) The failure to comply with this section shall render the cross-collateralization clause void. (2) A cross-collateralization clause that is void shall not affect or impair the validity of the security agreement, instrument, mortgage, or deed of trust. (f) This section applies to a security agreement, instrument, mortgage, or deed of trust executed on and after September 1, 2021.

Legislative History

Added by Act 2021, No. 313,§ 1, eff. 7/28/2021.