UCC chattel paper definition causing collateral description headaches
Been wrestling with this for weeks now and getting nowhere fast. Our SBA lender is requiring a UCC-1 filing on some equipment financing deals, but they keep rejecting our collateral descriptions when we try to include chattel paper. The loan officer says our current description is too vague but won't explain what exactly constitutes chattel paper under UCC rules. We've got a mix of equipment notes, lease agreements, and some conditional sale contracts all bundled together. Some have the debtor signatures, others don't. The SOS keeps bouncing back our filings saying the collateral schedule doesn't properly identify the chattel paper components. I'm starting to think we're missing something fundamental about how chattel paper gets defined and described in UCC filings. Anyone dealt with similar collateral description issues when chattel paper is involved? These rejection notices are eating up time and the lender is getting impatient.
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Mikayla Brown
Chattel paper is basically any record that shows both a monetary obligation AND a security interest in specific goods. The key is that it has to evidence BOTH things - the debt and the collateral securing it. If your equipment notes don't clearly show the security interest in the actual equipment, that might be why you're getting rejections.
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Sean Matthews
•This is exactly right. I see people mess this up constantly - they think any paper related to equipment automatically qualifies as chattel paper but it has to meet both prongs of the definition.
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Ali Anderson
•So conditional sale contracts would definitely qualify then? Those always show both the payment obligation and the seller's security interest until it's paid off.
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Mikayla Brown
•Yes, conditional sale contracts are classic chattel paper. Lease agreements can be too if they're actually disguised security agreements, but straight operating leases usually aren't.
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Zadie Patel
Had this same nightmare last month. The problem is probably in how you're describing the chattel paper in your UCC-1 collateral schedule. You can't just say 'chattel paper' - you need to be more specific about what records you're claiming a security interest in.
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Logan Stewart
•What kind of description did you end up using that got accepted? Our current one just says 'all chattel paper of debtor relating to equipment' and obviously that's not working.
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Zadie Patel
•We went with something like 'all chattel paper consisting of records evidencing monetary obligations secured by equipment, including but not limited to equipment notes, conditional sale contracts, and security agreements relating to [specific equipment types].' The key was being specific about the types of records.
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A Man D Mortal
•That's way more detailed than what I usually see. Most people just put 'chattel paper' and call it a day, but I guess that doesn't fly anymore.
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Declan Ramirez
Actually had a similar issue and found this document verification tool called Certana.ai that helped me figure out the problem. You can upload your UCC-1 draft and it'll cross-check your collateral descriptions against standard definitions. Turned out our chattel paper description was missing key elements that would make it enforceable. The tool caught inconsistencies between our loan docs and the UCC filing that could have caused major problems later.
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Logan Stewart
•Interesting - did it actually help you get the filing accepted? I'm willing to try anything at this point.
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Declan Ramirez
•Yeah, after fixing the issues it flagged, our filing went through without any problems. It's pretty straightforward - just upload your documents and it tells you what's wrong with the descriptions.
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Emma Morales
•Never heard of automated UCC checking but that actually sounds useful. Manual review of these filings is such a pain and you always miss something important.
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Sean Matthews
The signature requirement is another thing to watch out for. Electronic chattel paper needs to meet specific requirements under the UCC to be considered 'authoritative' - it's not enough that it's just electronic. If your records don't meet those requirements, you might need to describe them differently.
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Logan Stewart
•Most of our stuff is electronic now but I have no idea if it meets the UCC requirements for electronic chattel paper. How do you even tell?
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Sean Matthews
•The electronic record has to show that it's the authoritative copy and there can't be any other authoritative copies. Usually this means some kind of control system that prevents duplicates. If you can't prove that, you might want to describe it as general intangibles instead.
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Katherine Hunter
•This is getting way too complicated. Why can't we just file on the equipment itself instead of worrying about all this paper?
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Lucas Parker
Been filing UCC-1s for fifteen years and the chattel paper category still trips people up. The main thing to remember is that you're not filing on the equipment - you're filing on the PAPER that represents rights to the equipment. That's a totally different kind of collateral with different rules.
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Logan Stewart
•So if we have a security interest in the equipment AND the chattel paper, do we need separate filings or can we describe both in one UCC-1?
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Lucas Parker
•You can include both in one filing, but they need separate descriptions in the collateral schedule. Equipment goes in one section, chattel paper in another. They're governed by different UCC rules so you can't lump them together.
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Donna Cline
•This is why I stick to simple inventory and equipment filings. Chattel paper is just asking for trouble.
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Harper Collins
Your lease agreements might not even BE chattel paper depending on how they're structured. True lease vs security agreement is a whole different analysis. If they're really leases, you probably want to describe them as general intangibles instead.
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Logan Stewart
•How do you tell the difference? Some of our lease agreements have purchase options at the end.
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Harper Collins
•Purchase options don't automatically make it chattel paper, but they're one factor. You need to look at the economic reality - if the lessee is essentially buying the equipment over time, it's probably a disguised security agreement and would be chattel paper.
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Kelsey Hawkins
•The bright line test is usually whether the lessee builds equity in the equipment. If yes, it's probably chattel paper. If no, it's probably a true lease.
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Dylan Fisher
ugh this is exactly why I hate UCC filings. Everything has to be so precise and one wrong word gets you rejected. Can't they just accept 'all assets' and call it good?
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Lucas Parker
•The precision is actually important for protecting everyone's rights. Overly broad descriptions can be unenforceable when you need them most.
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Dylan Fisher
•I get that but it's so frustrating when you're trying to get deals closed and the SOS keeps bouncing your filings for technicalities.
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Sean Matthews
•Better to get it right the first time than have your security interest be worthless because of a bad description.
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Edwards Hugo
One more thing - make sure you understand whether your chattel paper is 'tangible' or 'electronic' because the UCC treats them differently. Electronic chattel paper has additional requirements for perfection and priority.
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Logan Stewart
•Most of our stuff is electronic now but stored in different systems. Does that matter for the UCC filing?
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Edwards Hugo
•It can matter for perfection, but for filing purposes you just need to describe it accurately. The main thing is whether you have 'control' of the electronic records under UCC Article 9.
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Gianna Scott
•Electronic records are the future but man do they complicate UCC filings. Give me good old paper documents any day.
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Alfredo Lugo
We had a similar issue and ended up using Certana.ai to verify our collateral descriptions before filing. It caught several problems with how we were describing chattel paper that would have caused rejections. The tool compares your descriptions against UCC requirements and flags potential issues. Saved us a lot of back-and-forth with the filing office.
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Logan Stewart
•That's the second mention of that tool. Might be worth checking out if it can prevent these rejections.
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Alfredo Lugo
•It's pretty easy to use - just upload your documents and it tells you what needs to be fixed. Definitely worth it to avoid the headache of rejected filings.
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Sydney Torres
•Any tool that can make UCC filings less painful is worth trying. These rejections are killing my productivity.
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Kaitlyn Jenkins
Don't forget that if you're taking a security interest in chattel paper, you might also want to consider whether you need to file against the account debtors. Depending on your situation, you might need additional steps to perfect your interest.
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Logan Stewart
•The account debtors? You mean the people who owe money on the equipment notes?
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Kaitlyn Jenkins
•Exactly. If you're claiming the chattel paper, you might also want rights to the payments being made on those notes. That's a separate analysis but worth considering.
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Mikayla Brown
•This is getting into collection rights territory which is beyond just the UCC filing. But it's definitely something to think about.
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Caleb Bell
The bottom line is that chattel paper is one of the more complex collateral types under the UCC. If you're not comfortable with the definitions and requirements, it might be worth consulting with someone who specializes in secured transactions. A bad filing can be worse than no filing at all.
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Logan Stewart
•Probably good advice. This is taking way more time than I thought it would and the stakes are pretty high.
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Caleb Bell
•Yeah, chattel paper perfection can be tricky. The rules are different from other collateral types and there are priority issues to consider too.
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Danielle Campbell
•Sometimes it's worth paying an expert rather than trying to figure it out yourself and getting it wrong.
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Freya Andersen
Just went through this exact same pain with chattel paper descriptions getting rejected multiple times. What finally worked for me was breaking down each type of document separately in the collateral description rather than trying to lump everything together. For your equipment notes, make sure they actually show both the debt AND the security interest in the specific equipment - if they don't clearly establish the security interest, they might not qualify as chattel paper at all. Your conditional sale contracts should be fine since they inherently show both elements. For the lease agreements, you'll need to figure out if they're true leases or disguised security agreements first. If you can't tell, you might want to describe them as general intangibles instead of chattel paper to be safe. The signature issue is real too - if some don't have debtor signatures, they might not meet the chattel paper definition. Consider whether those unsigned documents should be described differently in your filing.
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