What is chattel paper?

Chattel paper is a legal term that refers to a document that represents both a monetary obligation and a security interest in personal property. This type of paper is commonly used in commercial transactions where goods are sold on credit or financed through a loan.

Chattel paper typically consists of two parts: a promissory note or other written promise to pay a certain amount of money, and a security agreement or financing statement that establishes a security interest in specific personal property as collateral for the debt.

Chattel paper is often used in business transactions involving equipment leases, inventory financing, and other types of secured transactions. It provides a way for lenders and creditors to secure their interests in the event of default by the borrower.

The rights and obligations associated with chattel paper are governed by the Uniform Commercial Code (UCC) in the United States. This legal framework helps clarify the rules and procedures for handling chattel paper in commercial transactions.