The rights of the lender who gives a chattel mortgage are valid only against others who know or should know of the lender's security interest in the property. Since the borrower possesses the property, others cannot realize that a chattel mortgage exists without notice. Each state, therefore, has developed a system for recording instruments showing the existence of chattel mortgages for particular items of property; these records are usually located in the county clerk's office.
If a recording system is in existence a buyer is presumed to know about a mortgage. Once, therefore, the mortgage is properly recorded, the buyer obtains the debt in addition to the property.
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