| When the chattel mortgage was introduced into China, only relatively rough rules were transplanted. The legislator neither considered the role of the chattel mortgage in the bankruptcy and enforcement of the guarantor, nor examined the publicity principle of the notice filing system. As a result, chattel mortgages are not only unable to function as expected, but also theoretically misunderstood in China. Registration confrontation element of chattel mortgages has the functions of negative publicity, priority allocation, and prevention of fraud. Negative publicity means that if a chattel mortgage is not registered, it cannot be paid in preference to other security rights. Therefore, if the chattel in question is not registered, the creditor does not have to take further investigation measures. The effect of priority allocation allows the mortgagee to determine the outcome of the priority competition with other interested parties on the basis of the registration time. Since a secret security right would make the debtor's property superficially unburdenable, it may constitute fraud against ordinary people. Therefore, the registration system is regarded as some form of insurance against creditor fraud. An unregistered chattel mortgage is not an obligation right, but still a real right. It is in a relatively inferior position in term of priority in bankruptcy and enforcement procedures. If the mortgagor has no right to transfer unlicensed chattels to a third party, the fate of the unregistered mortgage shall be determined in accordance with Article 106 of the Property Law. |
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