What is Chattel Mortgage Non-Filing Insurance
Chattel mortgage non-filing insurance is an insurance policy covering losses that result from a policyholder being unable to secure possession of property used as collateral in a chattel mortgage.
BREAKING DOWN Chattel Mortgage Non-Filing Insurance
Chattel mortgage non-filing insurance is purchased by banks and other financial institutions to provide them with a financial recourse in the event of a loss, and covers physical property that can be moved.
In insurance, a chattel mortgage is a mortgage on a piece of property that can be moved. A house would not be considered for a chattel mortgage, but the furniture inside the house would. Chattel mortgages may be taken out on machines and other industrial equipment, automobiles, aircraft, boats, and even artwork. Individuals and businesses with no access to real estate mortgages can take advantage of chattel mortgages as a way to obtain needed funds.
In a chattel mortgage, the chattel is used as collateral for the loan, and the legal title to the chattel is transferred to the lender. If the borrower is unable to repay the loan, then the lender will take ownership of the chattel, but if the borrower successfully repays the loan then the legal title is transferred back.
Chattel Mortgage Non-filing Insurance Process
The non-filing component of chattel mortgage non-filing insurance refers to the intentional failure of the lender to file the chattel mortgage record or files with the proper authorities as per the normal process. The failure to file can lead to a situation in which multiple third parties have claims against the assets of a borrower who has filed for bankruptcy. By not filing, the lender may find it impossible to enforce the terms of the mortgage by taking possession of the chattel used as collateral, as other third parties may have properly filed documents supporting their claims. n insurance policy covering losses that result from a policyholder being unable to secure possession of property used as collateral in a chattel mortgage.
Chattel mortgage non-filing insurance is triggered only in situations in which the policyholder is unable to enforce the mortgage because of the failure to file. It would not, for example, apply if the policyholder filed the necessary paperwork but was unable to enforce the mortgage for other reasons.
Chattel mortgage non-filing insurance is most commonly used in countries whose legal systems are based on English law, such as Australia and England. In the United States, chattel mortgages are referred to as secured transactions.