N.Y. UCC Law § 9-205

Section 9--205. Use or Disposition of Collateral Permissible.\n (a) When security interest not invalid or fraudulent. A security\ninterest is not invalid or fraudulent against creditors solely because:\n (1) the debtor has the right or ability to:\n (A) use, commingle, or dispose of all or part of the\n collateral, including returned or repossessed goods;\n (B) collect, compromise, enforce, or otherwise deal with\n collateral;\n (C) accept the return of collateral or make repossessions; or\n (D) use, commingle, or dispose of proceeds; or\n (2) the secured party fails to require the debtor to account for\n proceeds or replace collateral.\n (b) Requirements of possession not relaxed. This section does not\nrelax the requirements of possession if attachment, perfection, or\nenforcement of a security interest depends upon possession of the\ncollateral by the secured party.\n