account debtor

In the context of secured transactions , an account debtor is a person or entity who owes an obligation to a creditor for goods or services by virtue of an account , chattel paper , or general intangible , according to UCC § 9-102(a)(3) . However, it excludes persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper (see: UCC § 9-102(a)(3) ). An account debtor is an important part of an accounts receivable financing arrangement. For example, when a creditor offers services or sells goods to the account debtor, the creditor could allow the payment to happen at a mutually agreed later time based on the terms in the agreement or invoice.

See, e.g., Nickey Gregory Co., LLC v. AgriCap , LLC, 597 F.3d 591 (4th Cir. 2010)

[Last reviewed in February of 2025 by the Wex Definitions Team ]

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