A security interest also provides the secured party with the assurance that if the debtor should go bankrupt he may be able to recover the value of the loan by taking possession of the specified collateral instead of receiving only a portion of the borrowers property after it is divided among all creditors.
Security agreements are contracts.
Article 9 of the Uniform Commercial Code governs security interests in personal property. It has been adopted, with some modifications, by every state. A security agreement must comply with other state laws governing contracts. Article 9 of the Uniform Commercial Code covers most types of security agreements for personal property that are both consensual and commercial. Article 9 contains a statute of frauds which require a security agreement to be in writing unless it is pledged.